by Travis Johnson, Stock Gumshoe | December 18, 2008 12:38 pm
Over the past week or so I’ve been seeing a new ad for Peter Schiff[1]’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[2], 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[3] 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[4], 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[5].
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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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.
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.
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.
Alpine Total Dynamic Dividend Fund (AOD) is paying 35% at current prices. And comments?
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???
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.
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 return equivalent to movements in the gold spot price less fees.
The remaining 80% should be split evenly amongst the following recommendations:
Westshore Terminals- Income Fund, Canada, dividend 6.5% WTE-U:CN
They operate a coal shipping port in Canada. The coal miner extracts coal and loads it onto the train. The train rails the coal to the coast where Westshore loads it onto ships. The ships transport the coal to Asia.
PGG Wrightson- Common stock, New Zealand, dividend 8% PGW:NZ
The Group’s principal activity is providing a range of products, services and solutions to farmers, growers and processors in New Zealand, and to processors and end-users internationally. It trades under the PGG Wrightson brand in New Zealand, apart from the Lower North Island where the Livestock, Wool and Rural Supplies businesses are conducted under the Williams & Kettle brand. They provide farm management and are one of the largest seed producers on earth. The company was highlighted in Peter’s agricultural report back in January.
Duet Group- Common stock, Australia, dividend 10% DUE:AU
DUET Group invests in energy utility assets located in Australia and New Zealand. The Group’s investment assets include gas pipelines and electricity distribution networks.
PT Astra Agro Lestari- Common stocks, Jakarta, dividend 4.5% AALI:IJ
PT Astra Agro Lestari Tbk operates rubber plantations and manufactures cooking oil. Through its subsidiaries, the Company also operates a variety of other plantations such as palm oil, tea, and cocoa plantations.
Teliasonera- Common stock, Sweden, dividend 7% TLSN:SS
They are the Swedish equivalent to Sprint or Verizon. Phone, cable, internet, etc… They operate in the Nordic and Baltic countries, Russia and selected Eurasian markets.
Vitasoy- Common stock, Hong Kong, dividend 6% 345:HK
The Group’s principal activities are manufacturing and selling soy related food products. Based in Hong Kong, it has operations in the US, UK, China, Singapore, Macau, Australia, and the Netherlands. Worldwide demand for soy products continues to grow, earnings continue to grow, and the yield appears to be sustainable. Asian people don’t like cow milk and have greater lactose intolerance. This stock has enormous potential for growth.
Orkla ASA- Common stock, Norway, dividend 5.5% ORK:NO
The Group’s principal activity is to supply branded consumer goods to the Nordic grocery market. The Group operates through three segments: Branded Consumer Goods segment includes three divisions namely Orkla Foods, Orkla Brands and Orkla Media. Orkla Foods develops, markets and supplies food products. Orkla Brands comprises companies in the detergents, personal care, snacks, confectionery, biscuits, household textiles, dietary supplements and health products. Orkla Media includes newspaper, magazine, digital media sector and direct marketing operations. Specialty Materials segment consists three division Elkem, Sapa and Borregaard. Elkem manufactures metals and materials. Sapa manufactures aluminum profiles and heat transfer strips. Borregaard manufactures wood-based chemicals industry. Financial Investments segment includes investment portfolio and real estate business. This is a growth play. They are trying to be like GE.
Hyflux- Common stock, Singapore, dividend 2% HYF:SP
The Group’s principal activity is selling water treatment systems for both municipal and industrial applications to water generating machines from ambient air and faucet filters using advanced membrane filtration technology for the consumer market. Its product offerings range from water purification, separation and concentration for manufacturing process streams, fluid treatment and development of cutting edge technology in material sciences to open its areas for membrane applications either through in-house research or in collaboration with reputable institutions worldwide. The Group is also an integrated solutions provider, offering a suite of turnkey services including process design and optimization, engineering procurement and construction management, pilot testing, fabrication, installation, commissioning, operation and maintenance as well as Design-Build-Own-Operate (DBOO) solutions. This is a pure growth play.
PSP Swiss Property-Common stock, Switzerland, dividend 5% PSPN:SW
PSP Swiss Property AG owns and manages real estate. The Company owns a portfolio of office buildings in the financial and historic sections of the five largest Swiss cities. PSP’s tenants are primarily banks and other financial companies. The Company also manages buildings it does not own.
HongKong Electric Holdings-Common stock, Hong Kong, dividend 4.5% 6:HK
Hongkong Electric Holdings Limited generates and supplies electricity and provides engineering consultancy and project management services.
Nestle SA-Common stock, Switzerland, dividend 2.5% NESN:VX
Nestle SA is a multinational packaged food company that manufactures and markets a wide range of food products. The Company’s product lines include milk, chocolate, confectionery, bottled water, coffee, creamer, food seasoning and pet foods.
Singapore Post Limited- Common stock, Singapore, dividend 10% SPOST:SP
The Group’s principal activities are in operating and providing postal and logistics services. Mail division provides comprehensive services for collecting, sorting, transporting and distributing domestic and international mail as well as sale of philatelic products. It also offers ePost hybrid mail service which integrates electronic data communication with traditional mail. Logistics provides domestic and international door-to-door distribution services, including express delivery services and warehousing, fulfillment and distribution services. Retail division offers a wide variety of postal, agency and remittance services including products and services through post offices, authorized postal agencies and stamp vendors, self-service automated machines, vPOST internet portal and commissions and interest earned from financial services. Other activities include commercial property rental and investment holding.
Wajax- Income fund, Canada, dividend 19.5% WJX-U:CN
The company manufactures, sells, and supports mobile power systems, industrial components, and diesel engines for industrial and mining applications. Like a Caterpillar. They have been established since 1902. Last year they paid special distributions. They have very little debt. They are a possible take-over target.
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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.
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.
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 other indicators that every succesful trader utilizes for confirmation.
As was stated earlier, his economics WERE good but he is not a trader.
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 his timing is lousy.
“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?
What were his mining stocks recommendations?
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 and the likes of Jim Rogers say, the non-USD stocks etc will outperform both from an inflactionary angle and also from the fact that other economies (Asia specifically) are in a much stronger position, due to savings etc.
Unfortunatley, the macro movements move over time and not directly in line with the this-goes-up-this-goes-down theory behind them. Be patient and don’t invest cash that you’ll need in the short term.
Think, if you buy a 20% yielding holding, in 5 yrs from now everying you get is pure gain, either continued income or a capital gain (not accounting for taxes, of course), but you get the point. Even if the holding halves in value (but original payout remains) you would make 50% if you sold at half price. Hold this till you retire, how much would you have made, regardless of the stock price??
It’s sounds like a great long-term strategy to me.
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
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
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.
Since his brokerage doesn’t offer stops, I use “alerts” on the 5-letter symbol associated with each of the stocks, and I set the alert in my Scottrade account. Once the alert goes off, I call my broker and do the trades.
I also use the same five letter symbols to have a free INO daily Trend Analysis of the stocks send to me, which I keep an eye on.
With this disciplined approach, my EuroPac account is up almost 100% since last November, and I am a very happy camper!!
–joe
I think Euro Pacific has started offering to manage accounts > $100K since this post was written, unless they were actually doing that all along.