One of my favorite guests is Contra The Heard’s Benj Gallander. He’s a deep value contrarian investor, having very similar investing methods and philosophy that I do. He looks at broken, beaten down names that have been around for at least 10 years, that are so beaten down that target prices are often more than double the initial purchase price. Often he’s had his eye on a company for years before pulling the trigger on a position. This post will be a summary of his appearance on Market Call Tonight.
Before we begin, (it’s a commercial anyway) am I the only one who thinks Martin Baccardax looks like Michael Hainsworth’s older brother?
Benj has just been asked about New Gold. He thinks gold still has some room to go higher, but says you have to be wary. His largest position is a gold company (Richmont Mines) comprising 17% of his portfolio. This is what Contra The Heard does- they buy something like gold when it’s out of favor and then hold until the market falls in love again.
Benj is intrigued by Manulife, but isn’t ready to pull the trigger on it yet. He’d like it to go lower before he’ll buy it. He doesn’t like the amount of debt and equity the company has issued lately. He has no qualms about the dividend. The next question was related, talking about shorting the Canadian banks. The dividend makes this extra risky and Benj wasn’t in love with the strategy.
The next caller is Sam from Toronto who is the slowest talker ever. He wants Benj’s opinion on Flextronics. Benj likes the company, good management, but the debt load is somewhat excessive and they need to deal with it. Still has a target of $20 for the stock.
The next question is on RIM. It is absolutely amazing how far it’s fallen from the top. RIM’s balance sheet looks great, there’s just a risk that they’ll get hammered by a competitor’s better technology.
Here’s a thought: maybe one should look at the frequency of guest questions on Market Call to judge a market top. Lots of questions would indicate a top, while not so many would indicate a time to buy. If that’s the case, avoid gold at all costs. That’s two questions on the precious metal hitting record highs- to the contrarian guest.
And now, it’s time for the top picks. What happened to the rest of the show? Turns out I didn’t feel like typing for the whole hour.
Top pick #1 is Motorola. Their new android phones are starting to take off. They are looking to split the company into two, which Benj likes. Debt load is coming down, partially thanks to the sale of some assets to Nokia. I think this company has a lot in common with Nokia, they both need that kick in the pants to get back to former glory.
Top pick #2 is Yahoo. Benj thinks management is very overpaid, as well as the company has just slipped to third place behind Bing and Google. Even though the company’s short term prospects look bleak, he likes the long term outlook considering the clean balance sheet.
Top pick #3 is Liquidation World, but Benj didn’t have enough time to get into it. So you’ll have to do your own research on that one. One warning about Liquidation World though: it isn’t very liquid. (Pun totally intended)