New High Yield Pick from Peter Schiff

By Travis Johnson, Stock Gumshoe, December 18, 2008

Over the past week or so I’ve been seeing a new ad for Peter Schiff’s services with quite a bit of regularity — if you don’t know Schiff, he’s one of the several advisers who was warning about the current credit crunch a couple years ago, and he’s dining out on that prescience now. He runs Euro Pacific Capital, which I think mostly does managed accounts — so what he wants from you is not your subscription money, but he wants one of his salesman to talk to you on the phone (and, one imagines, convince you to open an account with them or otherwise use their services).

If you don’t feel like doing that to get the answer to today’s stock teaser, then you’re in the right place. I can at least help you out by figuring out the name of the company he’s currently teasing in the ad — Schiff has been focused on high yielding foreign stocks for quite some time, holding them through the downturn for the most part (according to his public statements, at least), and this is no different.

So what are the clues about this company?

It’s Chinese, which will turn off some of you instantly — but even with slowing growth and a clear refutation of the “decoupling” theory that China doesn’t need the West in order to grow, China does still remain one of the strongest growth economies in the world. And plus, they don’t have any pesky democratic principles to slow down their bailout programs — to the contrary, they have a government that’s going to have to spend some of its huge savings in order to keep people employed … and peaceful.

“Chinese TV Manufacturer with High Dividend”

“This company is one of the largest manufacturers of TVs, consumer electronic and display technology products, audio and visual and information technology products in China. In the export market, the company is a pioneer, offering quality in OEM (original equipment manufacture) and ODM (original design manufacture) services to international markets. Exports account for more than 15% of its total turnover.”

He goes into more detail about the company — he talks about the fact that they’ve gotten rid of their faltering mobile phone division, that they have a competitive advantage because of their access to flat panels, that the industry in general is still robust … and he concludes thus:

“Trading at just 2 times projected 2009 earnings, with 10% dividend yield, we view the Company as very attractive, with a compelling valuation. The share price has dropped over 50%. With a sound strategy focused on extending its market share in the Chinese TV market, we believe investors should put new money to work at these price levels.”

Sounds pretty good, eh? If you want to see the other details, they’re available in the latest issue of his free Global Investor newsletter, which is also generally a good read (even with the nameless, ticker-less teases). If you go read it, don’t forget to come back here for the answer!

So what is this company?

The mighty, mighty Thinkolator chews on those clues for a moment, then tells us that this is …

Skyworth Digital (0751 on the Hong Kong Exchange, SWDHF on the pink sheets)

This one is indeed a high yielder, at least if you look backward — the dividend for the last fiscal year (they’re on a June year) was 5 HK cents in total (a half cent interim dividend last winter, and another 4.5 cents at the end of the year). They currently have a dividend payout of about 25%, meaning they’re returning 25% of earnings to shareholders — in the last interim report, which was released last week, that dividend was announced as one cent versus a half cent a year ago at this time, so the indication, at least, is that they intend to maintain a good dividend.

I haven’t read any of the analyst reports yet, so I’m not sure what an objective forward PE might be, or if the forward PE of 2 is based just on Schiff’s analysis and projections. It’s believable, I suppose, though I don’t know if that level of growth will materialize.

The shares currently trade for about HK 45 cents, which would be a hair under six cents if you’re using US dollars and buying on the pink sheets (the volume is very low on the pink sheets, so be careful if you want to buy shares and go that route — make sure to place a bid that would be fair based on the current HK price and the current currency exchange rate, since that’s where the trading primarily takes place). Interestingly, the shares had such a quick spike about three weeks ago (from 40 cents to 50 cents, more or less) that the exchange asked the company if there might be a reason and asked for an official response — which was, essentially, “no.” Makes me wonder whether there might have been a big spike of buying by Euro Pacific Capital clients around then.

It’s a promising looking company, though I have no objective view of the potential growth of the Chinese TV market — I guess that’s probably the main wild card, since they are overwhelmingly focused on their domestic market (Schiff says 15% of sales are for export, the numbers I’ve seen are slightly lower but it’s quite possible that there are different interpretations based on the divisions they’ve recently shed, and they are growing their services to other original equipment manufacturers).

The company doesn’t carry much debt, they pay out a very reasonable percentage of income (many companies pay out well over half, they pay out about a quarter), so they should be able to finance their own growth to a good degree, and the shares certainly don’t look expensive — the trailing PE ratio is somewhere around 8, depending on how you figure it. It’s not a big firm, the market cap appears to be just about $140 million or so (HK$1 billion). If you’d like to research them further, a good place to start is always their filings and presentations — both are easily available on their website.

To his credit, Schiff includes some specific risks at the end of the email — and it’s far less florid than the typical newsletter ads I write about:

RISKS
Despite the low share price, it could drop farther.
The dividend could be cut.
We could be wrong in our evaluation of the company’s chances to prosper and increase market share.
The Chinese TV Market is very competitive, and should the company not execute its business plan well, its earnings could drop.
The Chinese currency could decline against the US Dollar

I don’t know much else about this company, but I’m pretty sure that this is the one Schiff is teasing … and I’ll give him credit for calling an interesting stock to my attention. This one may merit further research, I’ll let you know if I dig up anything more interesting, and I hope you’ll do the same with a comment below if this intrigues you.


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30 Comments on "New High Yield Pick from Peter Schiff"

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Charles Walter
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Charles Walter
December 19, 2008 3:08 pm

Peter Schiff does not mention how low his international stocks have become. This one sounds interesting however.

On another level, What are the gas rebate checks the Oxford Club is pushing? Sounds unbeliveable but if its a government program anything is possible.

farley 5
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farley 5
December 19, 2008 7:44 pm

Hard to find an uglier chart, even for a penny stock. Trades at 0.46 HK or around $0.06. Grab your wallet and run like all getout. Bottom of the trading range is 0.125 HK.

JC
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JC
December 19, 2008 10:12 pm

Last year Schiffs brokerage company charged me $75 for an inactivity fee with out any warning or that of my personal stockbroker.

He also charged me $25 to transfer the acct out without warning either.

Stuart
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Stuart
December 20, 2008 2:43 pm

Alpine Total Dynamic Dividend Fund (AOD) is paying 35% at current prices. And comments?

dav
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dav
December 20, 2008 6:15 pm

Wanted to know if the stock gumshoe had any info on the “outstanding investments” newsletter from Byron King, got a teaser about the “peak oil production” and what effect that it would have on the oil prices. Got any info on this???

Stock Swing Trades
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December 21, 2008 7:40 pm

Thanks for taking a look into the stocks that he might be suggesting. I was wondering from the ads what specific stocks he had in mind.

Anonymous
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Anonymous
December 31, 2008 4:50 pm
Here are the stocks that Peter’s broker tried to get me to buy when I started with him. Peter is a much better economist than he is a stock picker!! I only invested in a few of them, and some went WAY down (like Hyflux) so I dumped them at a loss. Some that I stuck with are doing well, others are still lagging: 20% to go into a GOLD ETF: ETFS Physical Gold (PHAU:LN) is designed to offer investors a simple, cost-efficient and secure way to access the precious metals market. PHAU is intended to provide investors with a… Read more »
TTD
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TTD
January 1, 2009 12:40 am

Thanks anonymous. it’s good to see what Schiff has been picking- I agree he is a poor money manager and no one should put all of their savings with him. I fear many more people will be hurt by him as his fame increases.

Bear 2008
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Bear 2008
January 1, 2009 7:20 pm

I asked EuroPac twice for a copy of their Fee Schedule. I never received one, and won’t invest with them unless they provide it.

Steve Bell
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Steve Bell
January 2, 2009 1:35 pm
The biggest problem with Schiff is that even when he is wrong he will tell you he is right, just not yet. He is a true believer and is positive that his ideas are accurate enough that he need not take other factors into account that might undermine his opinion. I enjoy hearing his rants but if he were to tone it down and look at technical indicators as confirmation of his trades he would do his clients a much better service. I have never heard him site volume and open interest, overbought or oversold conditions, moving averages or any… Read more »
Steve Bell
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Steve Bell
January 5, 2009 11:54 am
I suppose if you call 20 years long term his performance will be good (as will many others). But if you call one year long term (and I do) then down 40% on his mining stock recommendations is pretty much the same as all the others. Like I said, if he used a traders approach he would not get hammered on drops as he has in the past. He was tauting buying gold big time at $900-$1,000 and saying it was going to $1,500. Indicators said it would drop. It is now $860. His fundamentals might not be wrong but… Read more »
Kevin
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January 5, 2009 2:46 pm

“As was stated earlier, his economics WERE good but he is not a trader.”

Schiff does not claim to be a TRADER. He is a long term investor based on macro trends.

Over the long term his views have been very profitable. He has favored gold over U.S. stocks for years, where has that got him? His economics are fantastic, you all agree, this will pay off over the long haul. Who cares about short term performance?

Bear 2008
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Bear 2008
January 5, 2009 7:20 pm

What were his mining stocks recommendations?

Oz Williams
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Oz Williams
January 9, 2009 7:55 pm
Hi All, I can see why people are p*ssed that Schiff’s holding’s have been hit hard lately, but you can’t look at this based on the short term. He has never said he offer short term advice. If fact, he specifically say it is not short term. Macro changes don’t move simultaneuously in the short term, so even though, say , gold falls when instinct or theory says it should be rise, over the longer term gold will increase. Sames goes for his foreign stocks. With the forced liquidation recently, everything’s down, but allow things to settle and, as Peter… Read more »
who noze
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who noze
October 3, 2009 8:56 am

after careful anaysis from the clues presented i came to the the conclusion that yur favorite fast food stock in brazil is BOBS[BRAZIL FAST FOOD FRAnchisor to the yum brands as well as hot dogs

who noze
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who noze
October 3, 2009 9:20 am

looks like schiff brokerage got their training from e trade if acct is under 25thou the fees are on everything u buy inactive accts monthly fees on active accts u name it they got it

SnoopyJC
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October 3, 2009 9:50 am
Peter got me into Skyworth at a nickel a share. It’s now at 44 cents. That’s a 780% gain! I have since sold a portion of my shares three times, and it’s still worth more than my original investment. When I first got in with Peter, I didn’t understand technical analysis and chart patterns. Now I do. I use this knowledge to set stops and 1/2 off targets on each of his picks. I look at the charts weekly and move the stops up if possible. I am currently sitting in gains on the majority of my positions with him.… Read more »
Jaycephus
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May 6, 2010 11:21 pm

I think Euro Pacific has started offering to manage accounts > $100K since this post was written, unless they were actually doing that all along.

Gravity Switch
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December 19, 2008 10:18 pm

I have heard him talk a couple times about his portfolio — he does sort of gloss over the fact that his international picks have fallen at least as badly as the broader market in many cases, bu the sticks with the focus on the dividend and a belief that you’ll be repaid as the dollar weakens. We’ll see how it works out.

Gravity Switch
Admin
11
December 19, 2008 10:20 pm

Just turn the chart upside down and it will all look finer, no?

It has been an awful stock so far, though I have no idea whether he picked it earlier or this was a new idea this month. One wonders what the market for televisions will be in China if the exports continue to crash.

Gravity Switch
Admin
11
December 19, 2008 10:21 pm

Ouch — I have very little experience with these kinds of managed accounts and brokerages, but thanks for the voice of experience.

Barbara
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Barbara
January 3, 2009 10:50 pm

I have been considering investing with Schiff. How could he charge you for an inactivity fee if he is managing your account? He says he is a buy and holder. Where did he transfer your account to that you were charged? On a scale of 1 to 5 what is your overall feeling about Euro-Pacific and the way they have treated you?

Gravity Switch
Admin
11
December 20, 2008 9:00 pm

Have written about outstanding investments many times (use the search box at top to get a taste), but I don’t know if I’ve specifically seen that teaser recently.

The newsletter was a top performer during the five+ years of rising commodity prices that ended recently (they’ve mostly focused on commodities and hard assets and related stocks), I assume it’s probably doing quite a bit worse in the last six months, but haven’t checked.

Dave
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Dave
February 5, 2009 2:34 pm

They don’t “Manage” any money.
They are a stock brokerage only.

Dave
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Dave
February 5, 2009 2:43 pm
The problem is, and still continues to be, that everyone relies on others to learn the rules and trades of money. Peter has an excellent long term vision, but it’s up to individuals to actively watch markets, trends, indicators and such. Otherwise, you may as well purchase lottery tickets. Many people opened there accounts at the very top of the market, so they lost big right away. One thing I can say for sure is that he underestimated the deleveraging cycle. However, once that is played out, it’s only a matter of time before the dollar collapses as he has… Read more »
Gravity Switch
Admin
11
February 5, 2009 2:44 pm

True, though the only reason to sign up with the brokerage is because you want them to tell you where invest your money — technically they’re suggesting stocks and you’re agreeing to buy them, they’re not actually managing the money.

This may actually change, seems to me I read somewhere that Schiff has reportedly registered to become an investment advisor, wouldn’t be surprised to see some funds under his name in the near future. I’ll have to check that, not sure if it was a rumor or fact.

Jan Upton
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Jan Upton
March 8, 2009 3:46 pm
Barbara, I invested with European Pacific back in Jan. of 08 when the U.S. market started tanking. Of course, the rest of the world soon followed and our EP portfolio went down 60%. They do not believe in trailing stops, just buy and hold. Hard lesson – I am a firm believer in the 25% trailing stop now. Schiff really irritates me with his blase attitude about the losses his clients have sustained. My broker is very responsive but beyond selling you stocks they do not advise other than buy and hold. Also they have been promising more analysis for… Read more »
Allan Rubinstein
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Allan Rubinstein
March 9, 2009 12:59 am

I have subscribed a number of
times over the years. A good newsletter and a great track record for 5 years.
But alas the last 6 months they have gotten killed with many stocks down but who hasen’t no one I know. Unless you were out of the market or short

StockGumshoe
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StockGumshoe
October 3, 2009 2:40 pm

Sorry, didn’t mean to tease that one in the email — I don’t own shares, but yes, I have been tempted by Bobs a few times and may still buy in.

Troy
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Troy
August 14, 2011 12:18 pm

Now gold is at $1,700. 🙂

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