Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 4
I am no longer enthused on GG trips. Over the years, these trips have failed to give us any major leg up in any sense. Maybe these trips prevented GG from recommending firms far worse than what we have now.

To uncover European opportunities, I would suggest a thorough investigation on the ETF PLND components to see if we have a long term advantage here. Another opportunity is European banks. Opportunities like these.

I would be ignoring all those pink sheets exciting opportunities that are not accompanied by a thorough investigation on management quality, tenure, reputation etc. I don't care if P/E is 100. Just get me quality businesses.

Anurag
Print the post Back To Top
No. of Recommendations: 0
Print the post Back To Top
No. of Recommendations: 4
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?

Best,

Nathan
Print the post Back To Top
No. of Recommendations: 2
Nathan,

Thanks for your post.

Banks or financial institution should not be shunned. For example, look at the US landscape and I find investment / banks like SCHW in great shape. It was never in risk. I made solid money with both OXPS and SCHW and now they are merged. My other bank investment that did will was USB. II sold it but also clued me in that it was among the best run US banks. I hear the same about Wells Fargo. Surely, there will be the best in class investments like these in Europe. I know that AIB was a disaster but also recall that I never once criticized you on multiple AIB picks that crashed. AIB lost me the most money ever in my investing history. I have given GG team a hard time on far lesser failures. In AIB, you chose the best in the landscape but it crashed. In my book that is ok. People who are mortified of total losses should not invest in stocks. I would like to see banks and financial institutions that have the potential to not just survive but maybe thrive. Put a high risk rating without making them a formal rec but with a good set of reasons backing those investments will be nice to see. Let those who are willing to bet on the buildings in a city on fire make the call on purchasing.


I don't have any bias against pink sheets. The only reason why I talk about pink sheets is because of lack of ADRs. All I am asking for firms with high quality management and with tenures > 10 years in the market - not necessarily in the same company. for example, that agricultural pink sheet from Australia - PMLIF.PK. Someone pointed out for that company on the boards that only the owners tend to make money in Australian agro sector not the shareholders. So from that standpoint, that firm should never have been suggested in GG (from my perspective, please. Others feel free to should that you want 'em). Similar is the case for Chaoda, MPEL and YONG. There were enough warts in the investment thesis based on management quality in every one of these to not warrant the risks although at least one of these firms could be a mega bagger in the future. There needs to be some kind of a hint that management is shareholder friendly. Much of this hint can come from a long history on management personnel or the company's focus on rising dividend or something. If the firms are unable to explain why they need to apply for more funds while having lots of cash or make inexplicable purchases (coal mine for YOng, building for AOB) or a history of share dilution (as in case of Chaoda) we have to be doubtful on management motives. It it better to invest in WMT on the basis of its rising international exposure for modest returns than any of these firms.

The bottom line is that I am not asking for "safe" investments. I am ok with very high risk and a total loss. All I want is a good investigation behind any suggestion especially from the perspective of management quality. For me, it is also totally ok to say something like : "We feel the company X could have a good potential based on the following facts but have no idea of management quality bases on their market tenure or actions or motivations towards shareholders".

Anurag
Print the post Back To Top
No. of Recommendations: 2
Anurag

While I agree that banks shouldn't be shunned, I think your point about examining management and how they treat shareholders is the big question when looking at European banks.

As Nathan pointed out, most (all?) will have to raise capital at some point in order to clean their books from this mess and the longer they wait the more painful for existing shareholders. I'd be happy to get in on a bank that is going to eventually return to strength, but I'd prefer to do it after the dilution is done (did you see the terms on UniCredit's capital raise - attrocious for existing shareholders).

I am interested in Lloyds because I think once they sell off their troubled assets and close down their investment banking their market position in the UK will make them similar to USB and WFC (although the CEO is a bit of a mystery right now - it isn't clear he has the physical strength to see the transformation through). Their shares have been rising lately as the fears of Europe have been subsiding, but there is still a ways to go before they cleanse themselves of the mess they are in and further dilution isn't out of the question.

I also like the banks like HSBC and Standard Chartered that don't have as much exposure to Europe and instead are focusing on growing markets in Asia and Africa. I also like, as in the case of Standard, management teams that raised capital when the getting was good and are now sitting on solid balance sheets as their European peers are retreating to take care of the home fires.
Print the post Back To Top
No. of Recommendations: 0
I also like the banks like HSBC and Standard Chartered that don't have as much exposure to Europe and instead are focusing on growing markets in Asia and Africa.

Yep, banks like these!

What about BCS?

Anurag
Print the post Back To Top
No. of Recommendations: 0
What about BCS?

I would count BCS in the group of banks that frighten me. All kinds of exposure via derivatives that is near impossible to quantify.

Nathan
Print the post Back To Top
No. of Recommendations: 0
To add to Nathan's thoughts, BCS is very much entwined in the Europe/UK regulatory quagmire and while I think they may come out fine in the end because they will be one of the few UK banks left in the investment banking arena, the ringfencing proposals here in the UK could result in painful capital raises before we get through to the other side.

Assuming derivatives don't blow up the bank, of course.
Print the post Back To Top
No. of Recommendations: 0
Thanks! I will get out of it right away.
Anurag
Print the post Back To Top