Friday, October 29, 2010

Current Investment Ideas

I was recently asked by a family member for some investments to diversify into.  Here is a list of some of the opportunities I offered, which I believe represent decent value at this time. 

In Canada:

Fairfax Financial (TSE - FFH)
Manulife Financial (TSE/NYSE-MFC)
Peyto Energy Trust (TSE - PEY.un)
Hardwoods Inc. (TSE - HWD.un)


Wells Fargo - (NYSE - WFC)
Bank of America (NYSE - BAC)
General Electic (NYSE - GE)
Johnson & Johnson (NYSE - JNJ)
Kraft Foods (NYSE - KFT)

Many will be familiar with these names, except possibly the Canadian companies.  I have a few others that are under investigation, but more reading and study is required.  They are generally smaller and carry greater risks.  I also see some value in select large cap companies.  This is mainly because they many of them have had severe P/E multiple contraction over the past 10 years.  Walmart is one example whose share price has been flat while it's P/E has gone from 39 to 12.5 over that period.  Investors are growing impatient and the don't care that the underlying earnings of Walmart continue to grow. 

All of these companies listed above have outstanding long term economics, strong ROE's & returns on total capital, and many have unique competitive advantages.  I believe that all of these companies are trading at reasonable prices and some at outstanding prices.  It's definitely a head scratcher that a company such as Fairfax trades just above book value per share.  They have compounded book value at 26% for 25 years now.  Their handling of the credit crisis is nothing short of remarkable, and I would have no problem entrusting my capital to Prem Watsa.  Prem Watsa understands value investing and is slowly building a fortress in Fairfax Financial. 

I would recommend these all as long term investments, but you will have to be patient.  Buy them and forget about them for at least several years.  Check your yearly statements and watch them grow.  As Warren Buffett has said, "I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."

Accumulating cash at this time wouldn't be a bad option either. 

I have already posted on Hardwoods.  Click Here.  It is really only an opportunity for individual investors because it's thinly traded.  Volume has slowed, but to a patient investor you can pick some up here and there.  Couple of weeks ago the volume was very good (and so were the prices). 

Have a great weekend. 


Disclosure:  I own positions PEY.un, HWD.un, WFC, & GE.  I also own BAC warrants.

Always consult unbiased help to assist when selecting stocks to purchase.  As Warren Buffett once said, "The market like the Lord helps those who help themselves, the market unlike the Lord does not forgive those who know not what they do."

1 comment:

  1. MGN.TO is a good value play right now. Consideration given only to assets and not including any earnings the shares should be just over $3.00 are currently $2.25. If you give consideration to earnings which have been stable to increasing the value further increases. Finally they will very soon be rid of an impairment (a retirement payout over a few years) that will further boost earnings. Volume is almost nil but if you want a value play that is under the radar and often won't suffer as much market emotion.