Friday, April 10, 2009

10 value buy on consumer stocks ?

Saw a site that recommends 10 value Consumer stocks to buy base on what he learned from Benjamin Graham
  1. DNP
  5. JMI
  10. TOMEI
After gathering all the numbers for these 10 companies, this is their EPS

Some EPS are trending downwards so I would ignore them for now.  So I would only have a few left

EKOWOOD ( best formation )
IBHD ( has quite a few negatives )

TOMEI ( has a down trend but I just want to keep it in my consideration list as it is the best among the other down trends stocks )

These are their respective EPS trend graphs

Next I calculate the value of their stocks using this site with the following assumptions
use the lowest PE in past 10 years
use the 2 years EPS that can best match EPS growth trend
use 2008 EPS as the last known good result
I then find out the stock price that is worth me buying using the following assumptions
average of 15% growth yearly
for the next 10 years
a 50% safety margin ( I want to buy $2 with only $1 )
and these are my target buying price

Lets take a look at the technical charts for these stocks.  Basically these stocks have no volume which mean once buy in, you would have to at least keep for 3-5 years.  There is no apparent room for speculation.

After checking the last closing prices, EKOWOOD and LIIHEN both are just marginly under my target buying price, which smell like opportunity.  IBHD's price is $0.78 while my target buying price is $2.50, the difference is a bit too big which may require a re-examination to see what has happened.

So far all above are the stuff what you can get out of the numbers.  Lets take a look at the qualitative sides too.

Ekowood deal with wood and have a lot of trading sources all over the world.  While wood is not exactly a rising business, but if done correctly the resource is limited and supposinly the price can easily be appreciated.  However, Ekowood is too large and may not be easily transform into the new era of wood business.  Its not a business that will go away tomorrow but I do not forsee them to excel anymore.  Unless serious business model change is in place.  With only MYR 30 millions, you can take over the management to instill this change but TSH wouldn't let you.

LIIHEN is selling furniture, although also mostly wood based but they present themselves as the integrated solution provider.  Furniture isn't exactly a must buy item in consumer market.  So I do have doubts in any furniture based businesses that if they can survive through the next 2 years.  Before investing in LIIHEN, I may want to meet the management in LIIHEN and see what they plan to overcome today's problem while have big dreams to set for 5, 10 years future.  Without that, I wouldn't simply pick them.  I would also wait until mid of next year before heavily investment in them.

If you don't know IBHD, then you should know Sanyo electrical products.  They also built I-City in Shah Alam which is supposed to be the hot of the century.  If you are a Malaysian and don't know about I-City, then you may feel they aren't really that successful as a property developer neither.  Which I wouldn't disagree.  They tends to always spend a lot of money to make an event very hot for a very short time, but then without any supporting system at all for the crowd to come in and turn the marketing talks into real sales.  Imagine you see a flyer and call in but find that the operator do not even know what his own company is selling ?  If someone pick up your call at all.  This is one of the typical business that you need to know more internally what their linkages are economically and politically.  I don't have those knowledge and I usually stay away from it.  But if one day they have heavy volume traded, it could become a great stock to speculate in.

Out of these 10 stocks, I would put EKOWOOD as my top choice.  Followed by IBHD and Proton for future speculation targets.

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