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Ken Fisher Recommends: TAM S.A., NET SERVICOS DE COMUNICACAO, Canadian Shaw Communications, Huaneng Power International, Wynn Resorts, Hasbro

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(GuruFocus, October 22, 2009) Kenneth Fisher wrote a piece for Forbes entitled ”Viva the V” in which he predicted the market will rally another 20-25%. His reason?

It is not based on the value. As a matter of fact, Fisher pointed out that investors who are less bold are making a mistake by assuming market is rational. The market had a long (16 months) and deep (60%) downturn, so it is entitled to a long and steep rally, so argued Fisher.

That aside, here are stocks where Fisher find value:


Brazil's TAM S.A. (TAM) has 50% of Brazil's airline market. In developed markets airline stocks are dogs. In emerging markets they're growth stocks. tam should grow about 15% a year yet sells at only eight times my estimate of 2009 earnings, and at only 30% of annual revenue and 2.4 times cash flow (in the sense of net income plus depreciation).

NET SERVICOS DE COMUNICACAO S.A. (NETC) is Brazil's largest pay-TV provider, with 3 million customers. It also delivers Internet access and phone services. Net will grow with Brazil--and then some. It sells at 15 times my estimate of 2009 earnings.

With similar numbers of customers Canadian Shaw Communications (SJR) has a diversified communications business with cable tv, Internet, phone and satellite services. It should grow 12% a year and at 16 times earnings is relatively cheap for a company with low-risk growth. You get a 4.4% dividend yield.

Huaneng Power International (HNP) is China's largest nongovernmental electricity generator. It has 40 gigawatts of generating capacity in 17 wholly owned power plants, plus output from partially owned plants, and more power on the way. Power is central to China's growth and Huaneng is central to China's power. At 12 times 2009 earnings, 50% of annual revenue and 90% of book value it's cheap. Expect earnings growth of 15% a year.

Wynn Resorts (WYNN) is among the world's biggest gaming destinations. In 2006 it earned $629 million on $1.4 billion in revenue. Now earnings are crunched for obvious recessionary reasons. In 2010 it should have well over $3 billion in revenue and by 2011 should be earning over $1.5 billion. But the company's market capitalization is $8 billion. You are, in other words, paying less than 6 times plausible 2011 earnings.

Grandma and Grandpa have the dough. With the recession ending they will do what they felt bad about not doing last Christmas--spoiling the heck out of the grandkids. Throughout this recession the toymaker Hasbro (HAS) kept the growth up with its endless stream of household names like G.I. Joe, Nerf balls, Play-Doh, Playskool, Transformers and Tonka. It's a classic consumer discretionary stock at a time when consumer discretionary stocks should lead the market. It's cheap at 13 times 2009 earnings and 1.1 times revenue. The yield is 2.9%.


From Brazil airlines to Chinese Power, from a Canadian cable company to a US toy company, Ken Fisher found company worth investing everywhere.


Rating: 2.3/5 (4 votes)

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