Tonight on Market Call Tonight was the grand daddy of contrarian investors, at least in Canada, Benj Gallander. Along with partner Ben Staddleman, he runs the Contra The Heard investment letter, which boasts a 10 year return of 19.6%, seriously thumping the TSX or S&P 500. Benj looks for whole sectors that are beaten up, trying to cherry pick the best company among the peer group. Contra only looks at companies that have fallen recently, giving those companies a larger potential upside. They also only focus on companies that have been around for 10 years or more, and they set a target price when they buy.
Benj brings up an interesting point about the callers on Market Call. His rule of thumb is that when many people are asking about something, (i.e. gold these days) then that’s the time to sell. He states that investors in general will chase whatever is hot, sometimes resulting in some profits but more often than not an investor will get burned when the bubble inevitably pops.
What I like about Benj’s appearance on Market Call is the ideas I get from it. Questions asked to Benj include companies like Kingsway Financial, National Bank of Greece, Yellow Pages Media, as well as other names which aren’t even remotely contrarian.
Naturally, looking at 3 picks from just a year ago isn’t the best way to gauge an investor’s effectiveness. I’m less concerned with the results than I am whether Benj still thinks the companies mentioned are still a buy.
The first past pick is Norsat International, which is up 15% compared to last year. It’s a small satellite company out of B.C. Benj likes what the company is doing operationally, as well as cutting their debt. The company recently took over a competetor, Sinclair tech
Next, we have Iteris, a traffic flow company that trades on the Amex. The company had a recent bad quarter, losing money for the first time in a while. Benj likes the balance sheet, the fact management owns a significant percentage of it, he’s just waiting for a catalyst.
Finally, the final past pick is Fidelity Southern. The company was bought for around $3, was sound operationally, payed a stock dividend, and has enjoyed a nice 40% gain since Benj bought in. The target price remains above $18, meaning there’s still lots of room for the stock to run if everyone piles in.
Benj repeats himself, picking both Iteris and Norsat as top picks. We won’t talk about them again.
The third top pick is Flextronics. The company has started to make money again, and they’re improving the balance sheet. Business is improving as the economy improves. Benj thinks the company could triple, it’s just a matter of time until it does something to make it happen.
Benj is having problems finding companies that are cheap, a sentiment I share. Rising markets are tough for the value investor. Stay tuned next week for another one of my stock analysis.
I do not own any of the stocks mentioned in this post.