Sunday, August 06, 2006

Embrace Capitalism

Nearly a year ago, readers of this blog were introduced to FEH SP. FEH SP is a food and beverage company with a huge footprint in Russia and several other emerging markets. In Russia alone, their prospects are tremendous. Russia have rapidly embraced capitalism in the last 6 years and now has an economy that is humming along with a GDP just off a shade of a trillion dollars.

FEH SP has been able to capitalise on the rising Russian tide. Based on last Friday's close, the counter has chalked up in excess of 30% p.a. return and padded our pockets with consistent yields of 4-5%.

Three other counters were introduced to readers then. The stunning performance of Sarin was analysed recently but the counter has since fell from stratospheric heights. The chief causes are due to issuance of guidance that the diamond industry will slow down and the ongoing Lebanon conflict. This knife edge drop also reflects our dislike for companies which have been chased up by market punters. A year ago, the counter was a diamond in the rough. But after turning in good results, its growth prospects were overly touted, thereby leading to a rich P/E. As always, such a backdrop is a recipe for disaster when the growth potential does not materialise. We can only hope that readers have realised their gains.

On a brighter note, the two other counters featured a year ago have been taken private, underlining their under-valuation. The returns for both were good, in particular, that for TASH SP, aka Total Automation which rewarded shareholders with a handsome payout.



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