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Mathematician digs deep to unearth value stocks

Jin Won Choi, 31

Occupation

Founder and operator of MoneyGeek.ca

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The portfolio

Shares in Tim Hortons Inc., Perpetual Energy Inc., Intel Corp., Coach Inc., and more than a dozen others.

The investor

Jin Choi has a PhD in applied mathematics, with a specialization in financial mathematics. He worked at a hedge fund for two years as an oil and gas analyst, then left and launched MoneyGeek.ca to help less wealthy people invest wisely.

How he invests

"I'm a hard-core value investor," Mr. Choi says.

He uses the discounted cash-flow method to estimate the value of a company's shares. This involves projecting how much cash a company can make available to investors in the future, and converting it to a present value.

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"In my experience, great companies that trade at reasonable prices usually have some short-term headwinds. The headwinds could take the form of new competition, a natural disaster, an economic downturn …"

A big chunk of his portfolio is in profitable microcap companies. "I love this space because the competition from other investors is poor. The markets are particularly inefficient in this niche."

Recent move

Mr. Choi owns shares in natural gas producer Perpetual Energy because he believes natural gas prices will rise. Moreover, the company has started drilling a lot of heavy oil wells. "I don't think most investors appreciate just how profitable those … wells are," he says.

Best move

Cematrix Corp., a microcap company that sells concrete to oil-sands companies, was purchased at 4 cents a share in the second half of 2009 on the expectation rebounding oil prices would cause oil-sands companies to restart operations. It was sold at 16 cents about six months later.

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Worst move

Synergex Corp., a logistics company, was consistently profitable and traded at great valuations. Then the auditor was replaced and the shares delisted. "I lost every dollar invested."

Advice

"Don't rely on other people's opinions. Read the financial statements. Try to replicate what other analysts have done. When you find an error or point of disagreement, it's an opportunity."

Want to share your strategies?

E-mail mccolumn@yahoo.com

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