Steven Ko

He is sitting back and processing the violent selloff in tech stocks recently. He is surprised we have not seen a bounce in the market yet. As a value investor he likes the buying opportunities. The US Fed announcement this week towards being neutral has caused investors to become frigidity. The S&P500 PE ratio shows the market is expensive especially with interest rates near historic lows, so he expects “gentle headwinds” going forward.

How does he calculate value? – He thinks of value as a range, not an exact number. He looks at the intrinsic value based on the earnings power of the stock and can he buy it at a low enough price to reduce his risk. You have to do your due diligence and have risk controls when things go wrong.

Is Energy good value right now? – He thinks it is tough for a value investor to be in energy right now. He only holds 3% of energy in his portfolio. We just don’t know how long the supply glut will continue for.

How do you stay disciplined? – He suggests having a checklist. Look for companies that can protect high earning growth returns. Does the company deploy capital in an intelligent way? Does the company re-invest cash-flow to grow the company? Lastly, look for opportunity to purchase value – the lower the price relative to its intrinsic value.

Are Canadian banks good value? – They are currently good buys and recent quarterly earnings are good. BNS-T had great international growth. The group trades at a discount to the long term PE. They are an oligopoly in the Canadian space – a strong position. The banks have done a good job at risk control.

They missed expectations this quarter. It is an uphill battle for gold with cost risk, execution risk and more. If you want gold exposure, he would prefer a gold ETF or a royalty like Franco-Nevada.

He likes the management team and their branding. The stock is still too expensive. He would continue to hold it if you already own it. (Analysts’ price target is $165.00)

This is a core holding for him and it is a strong buy. As a spin-off of Brookfield Asset Management, the goal of the company is to re-invest capital and rotate it into high yielding opportunities – it pays very little dividend.

Long term this will be a good holding. It trades in a high-teens PE ratio. They are still small players in the bus market. He is impressed by management and likes the share buy-back, but he still needs to do more research.

Anytime a stock trades less than 4 times earnings, it usually foretells doom. The new CEO has restructured the balance sheet and now they have $2 billion of net cash, which is good. The flash memory product has faced headwinds. He thinks this is trading at too high a value still.

This is a speciality chemical company that is involved with chemical use in cell phone development. It is a small cap company, but has great growth opportunities.

There is an overhang in the auto parts space. He thinks it has good value and trades at a good multiple. Fears of cyclicality appear overblown to him. (Analysts’ price target is $78.50)

They have raised dividends, which signals confidence by management – who also owns the majority of shares. It has a service advantage and get loan turnarounds quickly. Brokers have technological advantages and there is reoccurring capital. Once a mortgage is closed it becomes highly visible and it shows the cash flow path.

He likes most of the Brookfield holdings and owns the parent company. Its payout ratio is about 80%, but sees the dividend as safe. It is soundly run and trades at a discount to NAV. A great long term holding. Yield 6.5%.

This is a core holding for him. The value of the real estate holdings alone are $200 per share. It is a hard company to value as half the company is recurring revenue and half is land sales. He is not sure how price reconnects with value – perhaps a matter of time.