Four Stocks I Like, From Four Different Countries
Posted: September 01, 2020
August 31, 2020 (Maple Hill Syndicate) – According to August 29 data from Johns Hopkins University, the United States ranks 11th worst in the world in coronavirus pandemic deaths per 100,000 population.
We have fared better than the United Kingdom, Italy, Spain or Belgium. But we have fared worse than Mexico, France, Romania, Israel and dozens of other countries.
Do you want all of your investment eggs in the U.S. basket? I say no.
I never want my portfolio to be All-American. And right now, there are several issues that could taint U.S. market performance in 2020-2021: The pandemic, the presidential election, a big government deficit, high unemployment and bad relations with China.
Maybe U.S. stocks will march forward despite these problems. I hope they do. The majority of my investments, for myself and clients, are in the U.S.
Nonetheless, a little international diversification seems like a fine idea. Here are four stocks from four different countries that I think U.S. investors would be wise to consider.
Li Ka Shing, a Hong Kong investor and business magnate, is sometimes called the Warren Buffett of China. He was judged the 30th richest person in the world in 2019 by Forbes magazine.
In early July, Li Ka Shing and his son Victor bought more than a million shares of CK Asset Holdings (CHKGF), a company he founded and Victor now runs.
CK Asset holds real estate in Hong Kong, London and worldwide. It has also diversified into utilities and aircraft leasing. Its net income was $2.6 billion in the past four quarters, but was almost twice that in 2018. I would put normalized net income at about $3 billion.
In the U.S., many companies are trading at about 30 times earnings. Multiples are lower in Asia, and quite low in Hong Kong, because of the heated tension between Hong Kong and Beijing. Currently, CK Asset trades at seven times earnings.
CK Asset’s current market value is about $19 billion. At 10 times my estimate of normal earnings, a modest valuation by U.S. standards, it would be worth $30 billion. At 10 times 2018 earnings, it would be worth $50 billion.
If Hong Kong manages to maintain a degree of independence as one of the world’s financial hubs, I think the capital-gains potential here is excellent.
In Japan, I like Taisei Corp. (TISCY), an engineering and construction firm. Founded in 1873, it is one of the five largest general contractors in Japan. It does residential, commercial and infrastructure projects in its home country, other Asian countries, and the Middle East.
Taisei has been profitable in 14 of the past 15 years. Profits were above $1 billion in fiscal 2018 and 2019. The market value of the stock is about $7 billion, which is only 6.6 times recent earnings. I think it’s a bargain.
In Germany, I find Lanxess AG (LNXSY) interesting. It’s a chemical company, formed in 2004 by a spinoff from Bayer AG, which wanted to concentrate on its pharmaceutical operations. Lanxess goes through feast and famine times, but has managed to stay in the black in 13 of the past 15 years.
The stock has a good Pietroski F-score, seven out of a possible 9. This is a measure of timeliness, based on whether certain financial factors are improving or not.
In Britain, as in the U.S., the pandemic has spurred demand for homes in the suburbs. Larger homes that can easily accommodate a home office are especially popular. One beneficiary is Barratt Development plc, one of the United Kingdom’s largest homebuilders.
Barratt lost money in the fiscal years 2009-2011 but has been profitable in the eight years since, with profits in a rising trend. The company’s debt is light, and the stock sells for seven times earnings.
Beginning in 1998, this is the 17th column I’ve written recommending some stocks outside the U.S. The average 12-month return on the previous 16 columns was 15.3%, which compares favorably with 10.4% for the Standard & Poor’s 500 Index. (For the latest column, make that an 11-month return.)
Twelve of the 16 columns showed a profit, and nine beat the index. Last year’s picks were up 15.9%, but the S&P 500 returned 17.9%, beating me out. JOYY Inc. (YY) and Sony Corp. (SNE) were winners, but Hella GmbH & Co. (HLKHF), Magna International Inc. (MGA) and Societe Bic (BICEY) were losers.
Bear in mind that my column recommendations are theoretical and don’t reflect actual trades, trading costs or taxes. Their results shouldn’t be confused with the performance of portfolios I manage for clients. And past performance doesn’t predict future results.
Disclosure: I own CK Asset Holdings, Sony Corp. and Societe Bic personally and for most clients. I own Taisei personally and for a fund I manage.
John Dorfman is chairman of Dorfman Value Investments LLC in Newton Upper Falls, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at firstname.lastname@example.org.