Sunday, January 14, 2007

Episode 3: The Empire Strikes Back

In August 2005, readers of MOS was introduced to a company which distributes fast moving consumer goods to Russia, its fellow ex Soviet bloc republics, Central Asia and Indochina. Then, we were salivating over its "big footprint" in these countries and were "positive about MacCoffee sales". In an update given a year later, we said that the company "has been able to capitalise on the rising Russian tide". So this post represents the third update.

This play on the emerging markets - FEH SP - i.e., Food Empire Holdings Ltd (SIN:F03), has continued to defy gravity in its astonishing rise late last week. It appears that in recent days, the market has latched onto the counter due to its cheap valuations, commanding market share and quality management.

Without including its bumper yields about 4-5% p.a., FEH has rewarded shareholders with a total return of 106% over the holding period. This works out to an approximate annualized return of 78%, or IRR of 72%. Whichever way you choose to look at it, this baby is screamer!

With the recent additional analyst coverage, it is likely that the exuberant party has just gotten started for FEH. Hence, by momentum standards (totally unlike MOS' tenets), there could be money still to be made. But are current investors picking up nickels on the highway?

As regular readers would expect, the more bullish the market is about the prospects of our holdings, the less sanguine we become. Despite being considered "contrarian" by some quarters, we consider it almost as a reflex defensive measure to protect our capital. In fact, we would like to remind fellow investors of Cinderella's plight when the clock strikes twelve midnight during her ball. Whilst we remain very positive (the superlative is not used lightly) about FEH's prospects, investors today have to ask whether the market price quoted is right for capital protection.

MOS congratulates early shareholders to this ball for bagging this baby. It was certainly rewarding in our bid to build our financial empire.

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Blogger Mebane Faber said...

As a Buffett fan, you may be interested in this article I penned on following Buffett's holdings via the 13Fs. . .

2:08 AM  
Blogger Mr Market said...

Hi Mebane, thank you for your link. Your blog is indeed a useful resource! I also enjoyed the article on David Einhorn. Cheers!

11:51 PM  

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