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Motley Fool Global Gains / GGM: Global Gains Philosophy


Subject:  Re: GG trips Date:  1/23/2012  11:44 AM
Author:  TMFDoraemon Number:  4703 of 5166

Another opportunity is European banks.

Gosh, Anurag, I'm curious as to why you're excited about European banks. It looks like a ton of capital raises are on the way and most of them have delayed the inevitable. It's also a very concentrated sector in most countries and in some cases the banking sector is larger than the economy (a data point we know is a potential problem from Ireland and Iceland).

So far the EU plan is to cure debt with more debt and spending cuts. I think once the GDP data from this exercise starts rolling in it could scare people a bit. So while banks are undeniably cheaper than they have been for years they have some large fundamental problems. My thinking is to let the full scenario in Europe play out before we go near banks.

What's your thinking?

Where I do see opportunity is in companies hq'd in Europe, but very much global operators. Many are small and mid-caps.

I would be ignoring all those pink sheets exciting opportunities that are not accompanied by a thorough investigation on management quality, tenure, reputation etc.

This bias against the pink sheets makes sense for US companies, but for foreign companies your bias should be set against the standards of the home listing. So the AIM or LSE for the UK, the DB for German firms, etc. Management, of course, still needs to be validated, but holding something against an LSE listed firm for having an ADR or foreign listing on the pink sheets isn't logical considering they have to follow UK compliance requirements, which are more shareholder friendly than US requirements. Volume can be a concern, but is there something else here that's bothering you?


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