Lorne Steinberg is President and Portfolio Manager of Lorne Steinberg Wealth Management Inc. His focus is global equities and value stocks.
Shinhan Financial is a South Korean bank trading at a steep discount to fair value . Unlike some other countries in the region, such as India, South Korea is running a current account surplus due to its export-based economy. As the economy recovers, bank earnings are poised to rise and valuations should return to a more normalized level, significantly above the current share price. We also own another Korean bank, KB Financial.
BP remains in the penalty box due to ongoing legal issues related to its Macondo well disaster. Nonetheless, this company has outstanding global energy assets, and is poised to resume growing its reserve base over the next few years. Earnings and cash flow are growing and the dividend yield is 4.7%.
Hosiden is another compellingly cheap Japanese company in the electronics business. It is involved in a number of niche markets and has been consistently profitable over the years and has no debt. As for valuation, it is trading for less than its net cash! Japan still offers so many ridiculously cheap values.
Disclosure: We own it in Steinberg Value Equity Fund, and therefore I and my family own it.
Past Picks: January 30, 2013
Then: $16.40; Now: $28.29; Total return: 76.68 per cent
Then: $47.63; Now: $62.96; Total return: +36.50 per cent
Then: ¥1129.00; Now: ¥1691.00; Total return: +54.53 per cent
Total return average: +55.90 per cent
As we enter 2014, valuation levels are substantially higher than one year ago, and bond yields are on the rise. However interest rates still remain low by historical standards which should give equity investors some comfort. This is definitely a stock picker's market, as many sectors such as REITs and utilities no longer offer much value. We expect Japan and Europe to be the outperforming markets this year, while Canada will probably remain a laggard due to our bearish outlook for commodity markets.