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Weekly Bargain Bin Blue Chips Update Q3 Week 11

227 views  2012-09-16 22:56   Tagsblue  chip  bargain  bin  below  book  value 

Blue Chip Stock = minimum market cap 1B + minimum 10/10 continuous years of dividends.
Market Price = book value + premium for future growth.

The Dow closed at 13,593.37 this week, up +2.15% from two weeks ago. The DJIA is now up +107.63% from its 5-year low of 6,547.05 on March 9, 2009.

I did not blog my lists of blue chip and emerging blue chip stocks last week because I was too busy working on my article for value idea contest entitled "Fundamental Analysis: Guangshen Railway (GSH)".

Bargain Bin Blue Chips

Meanwhile, out of 261 stocks in my blue chip watchlist, only 3 are now trading at or below half of price-to-book value: Sharp Corp. (SHCAY), Societe Generale (SCGLY) and Barclays (BCS).

Gone from two weeks ago are Mitsubishi UFJ Financial (MTU), Sony Corp. (SNE) and Deutsche Bank (DB). These three companies now trade above 0.5 of price/book, though for how long who knows? Mr. Market willing... they will get cheaper again.

Near-bargain-bin Blue Chips

As far as my list of blue chip near-bargain bin'ners, 20 are trading below 0.8 price-to-book value: 1 from the Americas, 9 from Asia and 10 from Europe.



As the markets all went up the past two weeks, so did the book values of Cheung Kong (CHEUY), Hutchison Whampoa (HUWHY), Sun Hung Kai Properties (SUHJY) and Sims Metal Management (SMS). Of the Hong Kong real estate/industrial diversified conglomerates CHEUY, HUWHY, SUHJY, HLDCY and SWRAY, Swire Pacific (SWRAY) has a "hidden weapon" that makes it the most attractive stock for me: the right to manufacture, market and distribute the products of The Coca-Cola Company in Hong Kong, Taiwan, seven provinces in Mainland China and an area of the western United States. The others are massive conglomerates, diversified from real estate into properties management and other industrial and consumer goods and services. Of those, Hutchison Whampoa is the most attractive company to me simply because it is the most diversified. Their operations comprise six core businesses - ports and related services; property and hotels; retail; infrastructure; energy and telecom. I held off investing in this first-class stock because I wanted to put my money into a Chinese railway company...

My investment in Guangshen Railway is a very long-term one. I am prepared to DCA my way into GSH for as long as the stock remains under 0.8 P/B. While others are fearful of China as an investment horizon, I remain optimistic and realistic. China has the world largest population - 1.3B - along with the world's fastest growing economy. It is a creditor nation and a producer nation. These factors add up to a galaxy of stock market opportunities that I refuse to pass up. Of course, like everything else in life, there will be ups and downs.


Three companies missing from my European near bargain-bin'ners list since the past two weeks are Nokia (NOK), Allianz (AZSEY) and STMicroelectonics (STM).

Stupidly, I invested in Nokia when it was just under $5.00. My intention was to DCA my way down into the stock until it recovered from its current crisis. While my intention was good, my valuing was way off. I bought at three P/B levels: 0.85, 0.75 and 0.65 - approximately. Then, after I had already put enough into NOK, I told myself I would only buy once it fell below $1.50, which was something like half its tangible P/B. Well, it went to $1.69 and then rocketed up to to $3+.

This little investing drama has been a good lesson for me in "cheap enough". What I mean is, if a stock is cheap enough, and I already know it is cheap, or believe it is cheap, I must buy shares at that time rather than waiting for a rock-bottom price that may never materialize. As the old saying goes "one in the hand is worth two in the bush." The plus in all of this is that it will take awhile for the company to pull out of its slump, most likely affording the prospect of future low share prices at which to take advantage of. I am still positive on the fundamentals of Nokia as it is a world-class blue chip stock and Europe's best bet on the mobile phone industry, which is still in its growth phase.

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