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Weekly Bargain Bin Emerging Blue Chips Update Q4 Week 13

252 views  2013-01-01 11:41   Tagsblue  chip  bargain  bin  below  book  value 

Emerging Blue Chip Stock = minimum market cap 100M + minimum 2/10 continuous years of dividends.
Market Price of a Stock = book value + premium for future growth +/- the nonsense of Mr. Market.

Emerging blue chip stocks are interesting...  considering they are companies that can be very large (1B+ annual revenues) and usually well-known (at least in their home countries) and have failed to either pay regular dividends for at least decade a or have failed to reach one billion market cap, they are blue chip in name only.  So in a sense they are oddities because for all intents and purposes, they are blue chip stocks but have fallen short in one important respect or another.  Therefore they need to emerge first before they qualify as bona fide blue chip stocks.

For example, Wienerberger AG (WIE in Vienna & WBRBY on the pink sheets) is in my list of emerging blue chips, but could easily be considered blue chip because of its size (817M euro market cap), scope of operations (230 plants in 30 countries/operates through 115 subsidiaries) and large revenues (1.9B euro in 2011).  However, Wienerberger failed to deliver dividends in both 2008 and 2009.  Yes, we could forgive management because they are in a cyclical industry (clay bricks and tiles for new home construction) and needed to conserve cash.  Yet the fact remains they could have chosen to deliver dividends but decided not to.  Another way of looking at it is that WBRBY is effectively a blue chip stock, but the company failed to excel in the face of crisis and therefore experienced a failure of magnitude. 

I only invest in dividend-paying companies.  Luckily, Wienerberger has again initiated annual dividend payments and are back on my buy-list.

Emerging blue chips are also interesting because they have either fallen from grace or they have failed to achieve a state of grace.  I once heard a financial analyst compare dividend to sacrament.  Sacrament is an outward sign of inner grace.  Dividend is an outward sign of inner financial strength.  I digress.

Emerging blue chips do have that potential to reach blue chip status and the journey is definitely as important as the destination.  There are companies in my list of emerging blue chips that have fallen in value 1000's of X in fundamental valuation.  For example, the Royal Bank of Scotland is valued at 0.29X price-to-book at the moment.  At the peak of the last economic boom ('07/'08) they were valued at 20.7X price-to-book, a difference of 7037.9%.  There are also companies in my list that are only one more year away from achieving blue chip status.  For such companies, these are exciting times.

Emerging blue chip companies are run by management that have been tested and as a result have failed to deliver a decade's worth of dividend track record.  That or a stock has not yet been listed for ten years so management had not yet had the chance to prove their decade worth of dividends. 

Size of company market cap is my other quick heuristic to determine how "safe" a stock is.  I just feel more comfortable investing in larger companies.  For example, common sense says it is harder for a large company to fail than for a small company.  When was the last time a Fortune 500 company failed?  Yet there are many small companies that don't make it and the stock goes to zero.  Besides, there are way more than enough stocks out there with 1B+ market cap for me to swing my bat at.  No need to mess around with micro caps or penny stocks.  Too risky for me and I suppose 'outside my circle of competence.'

Meanwhile, are there any cheap emerging blue chip stocks for our consideration?

Bargain Bin Emerging Blue Chips (stocks trading at half or below price/book value)
Below are my lists of bargain bin and near-bargain bin emerging blue chips. Data for financial ratios are obtained from Yahoo! finance.

Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Grupo Casa Saba GCSAY Mexico Consumer Services 0.38 9.86 6.95 → 40.31 7.10
Petrobras Argentina PZE Argentina Oil & Gas 0.45 8.17 5.01 → 27.60 4.75
Centrais Eletricas Brasileiras EBR Brazil Utilities 0.11 2.26 6.31 → 22.74 3.06
China COSCO Holdings Co. CICOF China Industrials 0.21 N/A 0.39 → 2.70 0.46
FUJIFILM Holdings Corp. FUJIY Japan Technology 0.44 19.94 16.81 → 48.74 19.98
Korea Electric Power Corp. KEP S. Korea Utilities 0.19 N/A 7.44 → 23.87 13.97
KT Corp. KT S. Korea Telecom 0.37 3.78 10.91 → 28.27 16.68
Wienerberger WBRBY Austria Industrials 0.33 N/A 1.33 → 14.10 1.88
PSA Peugeot Citroen PEUGY France Consumer Goods 0.13 N/A 7.55 → 91.33 7.39
Commerzbank CRZBY Germany Financials 0.32 7.83 1.36 → 44.37 1.95
The Bank of Ireland IRE Ireland Financials 0.42 N/A 4.00 → 792.70 6.49
ArcelorMittal MTE Luxembourg Basic Materials 0.47 N/A 13.49 → 103.01 17.43
AEGON AEG Netherlands Financials 0.31 9.51 2.42 → 20.17 6.40
ING Groep ING Netherlands Financials 0.48 5.79 3.16 → 45.99 9.49
Mosenergo AOMOY Russia Utilities 0.13 5.50 2.15 → 26.00 3.00
Gazprom OGZPY Russia Oil & Gas 0.43 3.28 6.16 → 31.12 9.64
Royal Bank of Scotland RBS Scotland Financials 0.29 N/A 3.51 → 219.60 10.79

Near-bargain-bin Emerging Blue Chips
:  Americas

Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Aspen Insurance Holdings AHL Bermuda Financials 0.63 8.70 14.33 → 31.18 32.08
Niko Resources NKO Canada Oil & Gas 0.67 N/A 8.25 → 113.02 10.65
Petrominerales PMG Canada Oil & Gas 0.67 2.59 5.61 → 40.98 8.42
Rona Inc. RON Canada Consumer Services 0.75 N/A 8.70 → 17.35 10.67
Banco Santander (Brasil) BSBR Brazil Financials 0.69 22.98 6.63 → 15.30 7.28
Companhia Para. de Energia ELP Brazil Utilities 0.68 8.60 8.77 → 28.89 15.27
Fibria Celulose FBR Brazil Basic Materials 0.78 N/A 3.95 → 34.35 11.37
Gafisa GFA Brazil Financials 0.76 N/A 2.28 → 23.25 4.65
Suzano Papel e Celulose SUZBY Brazil Basic Materials 0.68 N/A 4.00 → 43.04 10.50

Near-bargain-bin Emerging Blue Chips:  Asia

Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Mahanagar Telephone Nigam MTE India Telecom 0.59 N/A 0.75 → 10.25 0.91
Kansai Electric Power Co. KAEPY Japan Utilities N/A N/A 3.26 → 12.70 5.61
Konica Minolta Holdings KNCAY Japan Technology 0.69 12.76 12.78 → 25.81 14.27
Nomura Holdings NMR Japan Financials 0.79 38.34 2.95 → 17.63 5.87
Mizuho Financial Group MFG Japan Financials 0.68 8.79 2.45 → 12.69 3.66
ORIX Corporation IX Japan Financials 0.75 12.85 9.88 → 123.53 56.62
Ricoh Company RICOY Japan Technology 0.75 N/A 33.76 → 111.25 52.60
Sumitomo Mitsui Financial SMFG Japan Financials 0.76 9.96 5.18 → 7.56 7.34
TDK Corp. TTDKY Japan Technology 0.78 155.06 32.26 → 73.40 36.55
KB Financial Group KB S. Korea Financials 0.62 8.63 17.30 → 92.90 35.90
Shinhan Financial Group Co. SHG S. Korea Financials 0.73 8.39 26.32 → 143.43 36.42
Woori Finance Holdings Co. WF S. Korea Financials 0.52 5.62 10.40 → 61.20 33.35
AU Optronics Corp. AUO Taiwan Technology 0.70 N/A 2.79 → 17.91 4.50
United Microelectronics Corp. UMC Taiwan Technology 0.72 19.85 1.59 → 4.1 1.99

Near-bargain-bin Emerging Blue Chips:  Europe

Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
EVN EVNVY Austria Utilities 0.80 11.41 2.19 → 7.00 3.20
Danske Bank DNSKY Denmark Financials 0.68 23.75 2.85 → 21.50 8.31
TORM TRMD Denmark Industrials 0.65 N/A 2.48 → 456.50 3.10
Stora Enso SEOAY Finland Industrials 0.72 13.24 3.67 → 19.34 6.85
UPM-Kymmene UPMKY Finland Basic Materials 0.63 13.82 6.12 → 24.05 11.64
Deutsche Lufthansa DLAKY Germany Consumer Services 0.79 38.65 10.02 → 28.60 19.29
Fiat FIATY Italy Consumer Goods 0.52 27.15 4.55 → 32.77 5.10
Telecom Italia TI Italy Telecom 0.57 N/A 8.07 → 41.09 9.02
Ternium TX Luxembourg Basic Materials 0.79 9.27 5.54 → 44.60 23.55
Magyar Telekom MYTAY Poland Telecom 0.79 N/A 8.05 → 16.83 8.29
Mechel OAO MTL Russia Basic Materials 0.65 N/A 2.95 → 57.62 6.89
Iberdrola IBDRY Spain Utilities 0.73 8.16 14.11 → 64.51 21.05
Lloyds Banking Group LYG England Financials 0.76 26.25 1.40 → 36.80 3.19

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