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| Coming the
week of November 8th 1999: An all new stock ideas section featuring
long and short ideas. |
GO
LONG OPINION ARCHIVES |
CLICK TO VIEW OPINION |
| INDONESIA:It's always a shame to see a dictator go. If Suharto is serious about
stepping down, we expect to see a pop up in the market when a successor is finalized--that
is providing that Suharto and his family are not controlling the new government from
behind the scenes. A new non Suharto linked government, and an accompanying lessening of
violence should produce a favorable market environment over the coming years. The
Indonesian market has gone from being extremely overbought last year to extremely oversold
this year.When the clouds look darkest and panic reigns is the best time to buy. We expect
any purchases to do very well if held for 3 to 4 years. We would avoid the closed end
Indonesian funds which are selling at premiums to NAV of 80-130% and instead purchase the
following stocks (5/19/98): The new Indonesian government has done a good job of restoring calm.
The relative peace in Indonesia has comforted the stock market which appears ready
to recover some of the losses seen during the panic driven selling prior to Suharto's
resignation. Look for the market to continue to inch upwards as investor sentiment returns
to more normal levels. We believe the economy has bottomed and will return to a growth
path by late 1999. We expect the financial markets to begin a recovery well in advance of
this. The recovery of the Rupiah in anticipation of an economic upturn will provide a
powerful profit boost for foreign investors. We continue to overweight the Indonesian
market. (7/20/98) |
| MESSAGE BOARDS |
| TLK (Telekomunikasi
Indonesia): The Indonesian telco is extremely oversold
and is trading at a great discount to other phone companies. It is trading at 12.5 times
1999 estimates, with a PEG of 1.1, which is a steal compared to the valuations given
telcos like the Baby Bells. Given the low phone line penetration in Indonesia, we
feel that TLK has plenty of room for growth in the coming years. We're buying this
one now before the rates go up. |
| QUOTE CHART
BROKER RESEARCH MESSAGE BOARDS SEC FILINGS |
| IIT (P.T. Indosat): The Indonesian long distance provider. Another deeply oversold telco. It
is trading at 12.2x '98 estimates and only 9 times next year's. Stronger financially than
TLK (although neither company is in danger of going out of business), its earnings should
bounce back faster. Price has held well above January lows this time down. Another one to
buy and hold onto until the market bounces back. |
| QUOTE CHART
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| PAP (Asia Pulp and
Paper): Cheap, low cost paper producer's stock price
has taken it on the chin during the recent riots. PAP is trading at just 10.7 times '98
earnings estimates and at a ridiculously low 5.4x next year's estimates. The PEG on this
growth stock (yes, you heard right, a paper stock that's a growth company) is an insanely
low .22. We'll buy this over International Paper any day. (5/19/98) PAP's
stock price was hit by a wave of selling this year as investors indiscriminately dumped
the stocks of Asian and emerging markets companies. PAP has remained profitable throughout
the Asian economic crisis. The company's stock now trades at a deep discount to the
valuation levels given other paper industry equities. PAP shares trade at a
Price/Book ratio of 0.74, and at a Price/Sales ratio of 0.8. Earnings are expected to grow
64% next year to $1.41 a share, giving the company a prospective 1999 P/E ratio of 7.2.
Earnings over the next 5 years are projected to grow 16% a year. The stock
has broken its downtrend line and is ready to move strongly to the upside. (10/20/98) |
| QUOTE CHART
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| GRL (Gulf
Indonesia): Yes we know it's technically a Canadian
company but it does its oil exploration in Indonesia. This oil exploration stock has been
beaten up by the twin negatives of low oil prices and exposure to the Indonesian economy.
When negative sentiment rains it pours. With either a stabilization in the Indonesian
political situation or an uptick in oil prices this stock will jump skyward. Yes Virginia,
we do think Santa Claus also likes this stock--a gift at present prices. |
| QUOTE CHART
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| PSNRY ( PT Pasifik
Satelit Nusantara): PSNRY
is a development stage provider of communications services in Asia. The company is
pursuing 3 main lines of business. Xpress Connection provides satellite based rural
telephony. The company's current revenues come from this division's leasing of
satellite transponders. The company is currently in talks to expand the Xpress service to
the Philippines. Xpress has started a new business orientated service called Private Line
which is targeting businesses with its low cost service. Private Line will produce higher
profit margins than the regular Xpress service. The rate of Xpress's expansion depends on
the pace of Indonesian economic recovery. PSNRY's Multi-Media Asia division is developing
a multimedia communications system which will combine voice, video, and data. This service
is expected to be operational by late 1999 with service in Indonesia, Pakistan, India, and
Bangladesh. The company's third division holds the greatest promise. 33% owned PT
Asia Cellular Satellite will provide satellite based cellular voice and data services to
subscribers when it starts in early 1999. The service will be offered in 8 Asian nations
when it goes on line next year. We believe that PSNRY will experience exponential
growth once it begins full operations next year. The company will be given an added boost
by a recovery in Asian economies next year. This satellite provider's stock offers a
chance to buy great growth potential without paying the type of over inflated price that
less promising growth stories (i.e. internet stocks) currently command. |
| QUOTE CHART BROKER RESEARCH MESSAGE BOARDS SEC FILINGS |
| SOUTH KOREA
In one year it has gone from penthouse to doghouse.
Judging from current news reports you would think the country was about to disappear off
the face of the map. News flash--it's not. The market has fallen below December's
lows because of financial troubles at several large chaebol and because of a wholesale
dumping of emerging market stocks by skittish fund managers. Despite the negative
sentiment, we believe now is the perfect time to load up on South Korean stocks. Investor
psychology is at a lowpoint despite the meaningful economic reforms implemented. The
following South Korean stocks are the best ways to play this market: |
| MESSAGE BOARDS |
| PKX (Pohang Iron and
Steel):The world's lowest cost steel producer (which
has remained profitable throughout the crisis) is selling at firesale prices
of 7.4x this year's earnings and 4.5x next year's. The PEG ratio is just 0.45 on
next year's estimates. The stock, 50% off it's 52 week highs, has completed a double
bottom and is poised to rise. |
| QUOTE CHART
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| KEP (Korea Electric
Power): KEP holds the South Korean electricity
monopoly. The stock has been badly beaten up by the fall in the Won. Increased debt
sevicing costs of dollar denominated debt will cause it to turn a loss this year. It seems
to have passed the worst of it's problems and the stock is holding the December lows.
Since South Korea isn't about to become a candle powered nation, we know the company will
still be here next year. A return to profitability is expected in 1999. Now is the time to
start accumulating this one. |
| QUOTE CHART
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| SKM (SK Telecom): SKM is a $2 billion cellular company. The combination of South Korea's
problems and a meddlesome parent company has whalloped the stock price. It has
remained profitable throughout the crisis unlike many world cellular providers who have
never turned a profit. It is the cheapest cellular co. around, trading at 15.8 times 1998
estimates and 10.5 times next year's. The stock has held well above December's lows and
has emerged from a double bottom. As the cheapest cellphone stock around, we're buying
this one. |
| QUOTE CHART
BROKER RESEARCH MESSAGE BOARDS SEC FILINGS |
| THAILAND: A resurfacing of Asia panic has slammed this country's markets once
again--unjustly in our view. The country has made serious strides to reform its economy
and to end the endemic corruption that had pervaded every aspect of economic life.
This latest market swoon is just an example of the "it's an emerging market so we
must dump it--they're all alike, don't you know" mentality that is rampant among
inexperienced fund managers. Now is the time to get into Thailand. |
| MESSAGE BOARDS |
| TC (Thai Capital
Fund):This closed end fund is trading at the lower
premium of the 2 Thai funds. Even at a 26% premium to NAV (down from nearly 90%) we like
this fund as the best way to participate in Thailand's recovery. The recovery potential in
the Thai market far outweighs having to pay a premium for this fund. |
| QUOTE CHART
BROKER RESEARCH MESSAGE BOARDS SEC FILINGS |
| INDIA: 2 days of nuclear testing trounced the Indian markets. We believe
the market overreacted. India has avoided most of Asia's problems and was a buy even
before the tests. The best time to buy is when the "blood's in the streets", and
that time is now. The economy is continuing to grow strongly and any sanctions will have
limited effect. With all of the Indian closed end funds trading at discounts of near 20%
this is the time to visit India. |
| MESSAGE BOARDS |
| IFN (India Fund): Of the closed end funds, we prefer IFN which is a 20% discount to
NAV. The fund tends to invest in many more growth orientated companies than other Indian
funds do. We like this over a 3 to 4 year timespan. |
| QUOTE CHART
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| ZNH(China
Southern Airlines): Lower passenger traffic resulting
from Asia's financial turmoil has hammered this stock down 67%. As one of the
largest airlines in a rapidly expanding market, we like this stock for its turnaround
potential. The stock has recently been slammed as investors again dumped anything Asia
related. The stock successfully defended a retest of its lows and has completed a
double bottom. At 8.2 times next years e.p.s. estimates this company is a bargain. |
| QUOTE CHART
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| SHI(Shanghai
Petrochemical): A slowdown in Chinese growth and the
wholesale dumping of emerging markets stocks have both contributed to this stock trading
at all time lows. The company's profits have slumped but we believe this is the
bottom. Management plans an aggressive expansion plan to double the size of the company in
the next 3 years. This growth, along with a recovery in its markets and a return to more
normal levels of investor sentiment towards Asian issues, should lead to outsized gains
for this equity over the coming year. At 14.9X this year's and 10.5x next year's estimates
this growing company trades at a discount to its international peers and is a good way to
go long a recovery in sentiment towards Asia. |
| QUOTE CHART
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| ROS (Rostelkom):
The Russian stock market has been beaten down 40%
since the beginning of the year on a combination of disappointment with the pace of
progress in the Russian government and a blind dumping of emerging market equities. Sorry
Mr. Market Guru, but our little brains do not believe all emerging markets rhyme with
Southeast Asia. In between sackings of cabinet members the Russian economy has been making
steady, although slow, progress. Rostelkom is the national telco and is poised to grow as
the Russian telecommunications infrastructure is improved. It still puzzles us why some
investors find the slow growing Baby Bells bargains at 20x earnings and view faster
growing emerging markets telcos priced at 10x earnings as bad investments. Perhaps they've
been listening to too many analysts whose companies do large amounts of underwriting
business with the Baby Bells? We have the opposite view of these manipulated investors and
find the beaten down ROS a bargain at these levels. Trading at 9.3 times this year's
earnings, with a PEG of 0.69 (based on '98 estimates), this company is expected to grow
13.5% a year over the next 5 years. We view it as a core portfolio holding (provided that
you get some Dramamine to stomach the seesaw Russian market). |
| QUOTE CHART
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| MBK (Bank
of Tokyo-Mitsubishi): What, you like a japanese bank?
Yes we do. We believe that all of the bad news has already been priced into the Japanese
banking sector. MBK is the largest Japanese bank and has the financial muscle to make it
through the current recession and bad loan problems. The stock has been oversold down to
multi year lows. We view the extreme pessimism surrounding the banking sector (and Asian
markets in general) as a positive. It allows us to purchase quality companies like MBK at
depression level prices. We look for a strong recovery by MBK over the coming years.
|
| QUOTE CHART
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| MDM (Medpartners):
The stock of Medpartners is trading at multi year
lows. This manager of healthcare delivery networks has been hurt by a multitude of woes: a
failed merger with Phycor, large restructuring charges, and rising client operating costs.
We believe management is taking the necessary steps to return the company to growth and
profitability. A spinoff or sale of the fast growing pharmacy benefits unit is a
distinct possibility. With overwhelmingly negative sentiment towards the stock, and a
depressed valuation of 11.8 times next years earnings with a PEG of 0.56, we say now is
the perfect time to go long MDM. |
| QUOTE CHART
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| OLS (Olsten):
This provider of temporary staffing, home health care
services, and medical staffing has been hurt by rising costs in the healthcare division.
The stock's price has been beaten down accordingly and not a cheery word can be found
about the company among the many market pundits. The stock has completed a double bottom
and we believe is poised to rise. Revenues are still growing strongly and management is
taking effective steps to cut costs in the healthcare division. At a current year's PE of
11.9, and at 9.9 times 1999 earnings with a PEG of 0.7, we regard the profitable OLS as a
healthy prescription for profits. |
| QUOTE CHART
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| ASL (Ashanti
Goldfields): This Ghana based goldminer has been
beaten down along with the rest of the gold sector. The acquisitive ASL has been hurt by
the slide in gold prices but has managed to remain profitable unlike many of its loss
ridden peers. We see limited potential for further central bank gold sales. We see the
gold price rising on any future hints of inflation (yes we know some of you will say
inflation has been permanently vanquished--but we say the UK just reported a monthly
inflation figure at a 5 year high), or on any sharp breakdown in the US equity market. We
look for ASL to rise faster than its peers when the inevitable upside breakout in gold
prices occurs. |
| QUOTE CHART
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| PAKISTAN: Pakistan has been hit by a myriad of woes: endemic government
corruption, violence in the financial center Karachi, government intransigence, and fears
of an escalating arms race with India. While we don't have any great hopes of the
government doing anything but remaining mired in disarray, we do believe that as fears of
an arms race die down and sentiment towards Asian emerging markets improves the stock
market will experience a sharp pop to the upside. |
| MESSAGE BOARDS |
| PKF (Pakistan
Investment Fund): The best way to play the coming jump
in the Pakistani market is through the closed end PKF which is trading at all time lows
and at a large discount to NAV. |
| QUOTE CHART
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TNT
(A.O. Tatneft): This Russian oil producer's
stock has been slammed down 50% since its late March NYSE debut. The collapse of the
Russian market and extreme weakness in the oil sector have combined to drive TNT's
shares down. We believe that the market has over reacted to the situation in
Russia and the Russian market is poised to rebound. Despite the rouble, the rubble
in the aisles of Moscow's exchange is only temporary. The Russian market will
rebound after the Asia/emerging markets hysteria subsides. We look for TNT to out
pace the Russian markets. The oil price has bottomed out. The oil sector is poised
to move higher in anticipation of a partial recovery in Asia later this year.
Trading at 12 times this year's estimates, we look for TNT to benefit from the twin
recoveries in oil and Russia. This stock should double over the next 18 months. We say go
long. |
QUOTE CHART
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Disclaimer
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