I wrote about one of Peter Schiff’s teaser picks a few weeks ago, and today I’m finally following up to cover the other one.
For those who don’t know Schiff’s work, he runs a brokerage firm that specializes in international investing and precious metals, with a focus, historically, on helping investors buy foreign-listed stocks that pay high dividends in some currency other than the dollar, which he believes will inevitably collapse. One of his communication vehicles is a newsletter called Global Investor, but the model is a little bit different than most of the teasers I write about: he’s not trying to snag subscribers, he’s using the newsletter to encourage people to call up his brokers and get full information about the stocks he teases (and, presumably, he’d like to have them sign up for a brokerage account at the same time).
When I last wrote about this latest newsletter of his, which came out in early August, it was to cover the second pick he was teasing — it caught my eye because it was in a similar sector to a past barnburner pick he had teased, you can see that article here if you’re interested (all about a Chinese maker of monitors and flat panel TVs — the stock is down a bit in the few weeks since I wrote about it).
But the newsletter teased two picks — so let’s now take a look at the other one, shall we?
Schiff’s newsletter says that this company …
“… mainly designs mobile phones and bluetooth chipsets. It is a global provider of testing, hardware, software, and exterior design solutions. The company lists its stock on the Singapore Exchange. It sells its products globally, but more than half of its revenue is generated within the Chinese market alone.
“A fast-growing company, its recent quarterly sales were double those of the same period last year. We like this company for its exposure to the growing market for 3G handsets throughout Asia. This small-cap company trades at a single-digit valuation and has offered consistent dividend payout for many years. At current prices and projected distributions, the dividend yield is approximately 5%. Its 52-week high was 78 Singapore cents, and its 52-week low was 38 Singapore cents.”
One thing that I like about reading Schiff’s letter, not least because it provides a refreshing change, is that he’s writing to a lot of folks with whom his firm has a much tighter fiduciary relationship — he can’t just spew out ideas willy-nilly like I can, or like a typical newsletter can from a publisher that doesn’t have a broker or financial advisor’s responsibility to keep your feet at least close to the ground. So he always includes some comments about risks …
“Risks in owning this company are: competition from other mobile handset designers, dropping prices if the market becomes saturated, and a general slowdown in purchases if a recession develops.”
As well, of course, as the standard tagline:
“Investing in foreign securities involves risks, such as currency fluctuation, political risk, economic changes and market risks. Precious metals are volatile, speculative, and high-risk investments. As with all investments, an investor should carefully consider his investment objectives and risk tolerance as well as any fees and/or expenses associated with such an investment before investing. International investing may not be suitable for all investors.”
All of which I’m sure all the good Gumshoe readers know already, but it never hurts to be reminded that yes, stocks are risky … and stocks that may be thinly traded in other countries with different laws and business standards can sometimes be more risky than the big multinational stocks we’re used to. Or at least, differently risky.
But as I said, you probably know that already — intuitively, if not by dint of personal experience. So what is this company that Schiff is suggesting to his clients?
Well, we toss that all into the Thinkolator, after carefully applying the Singapore filter, and learn that this stock is …
Longcheer Holdings (LHL at home on the Singapore exchange, LGCHF on the pink sheets — it’s thinly traded in both places, but, as you might expect, dramatically more so on the pink sheets)
This is a small company, the share price is about 71 cents in Singapore Dollars (about 53 cents US), which means it has a market cap of just over US$200 million. The price hasn’t changed since Schiff teased it, at least not substantially, so the trailing dividend yield is just over 5% — and yes, they have had the earnings to support that dividend, with a trailing PE ratio of just under 8.
Here’s how the company describes itself on their website:
“Longcheer Holdings Limited (hereinafter referred to as the Company) is a high-tech company specializing in handset research, development and design in mainland, China, providing total design solution for all segments of the handset value chain, from hardware and software to system testing and exterior design. Headquartered in Shanghai, the Company takes less than three years from foundation in 2002 to be successfully listed on the main board of Singapore Exchange Limited on May 2005. In FY2010, the total revenue reached RMB4.28billion, and shipment about 27.5 million units, making the Company one of the stable growing high-tech companies in China.”
The company reports its results with very cheery-sounding press releases, as you can see from the most recent earnings result from last week [pdf file]. From a quick look at their past results, it looks like they sell a lot of relatively unsophisticated cell phones — a few 3G phones, some “2.5G” phones, particularly for export to developing markets, and a huge number of GSM phones for the domestic market in China (they’re listed in Singapore, but this is really almost entirely a Chinese company).
So … like some successful picks we’ve seen from Peter Schiff, this one does have a decent-sized dividend (though not outrageously high or indicating a huge disconnect), and it’s in a challenging industry with heavy competition — if you’re interested in the shares I’d suggest starting out with their investor relations pages to get familiar with what drives their earnings and sales.
And, as always, if you’ve got an opinion … or if you develop one after looking into the stock … please let us know with a comment below. Thanks!