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The World’s Cheapest Stock Market

By Dr. Steve Sjuggerud
Monday, April 10, 2006

In the last few months, I’ve visited Sydney, Auckland, and Shanghai.  And would you believe it – not once was I passed on the street by a guy on an elephant. 

O.K. I don’t expect to see elephants in the streets of major cities.... but that happened to me the last time I was in Thailand.

Thailand is not like the rest of the world.  It’s one place that has significantly kept its identity and culture, and it’s a fantastic place to visit.  But it hasn’t been a great place to invest...

If you’d invested in The Thai Fund (TTF) when it started nearly 20 years ago and held it until today, quite frankly, you wouldn’t have made much money.  In that same time the S&P 500 is up about 400%.

Thailand is off everybody’s radar as an investment.  But if you know me at all, you know I like that... It may be time to sell some U.S. stocks and buy some Thai ones.

Right now, uncertainty reigns in Thailand... the country’s leader resigned just recently, and a new leader hasn’t been chosen yet.  It’s times like this that are usually good times to buy.

It turns out that Thai stocks are super cheap... In today’s Financial Times, it appears that Thailand is just about the world’s cheapest stock market.  Thai stocks are trading at a P/E of 7.5, and pay out 4% a year in dividends.  It doesn’t get much cheaper than that.

Even better, the main index of Thai stocks has just broken out to two-year highs:

Our DailyWealth mantra for what we’re looking for in investment is this:  cheap, hated, and in an uptrend...

Thailand is cheap... thanks to the uncertainty nobody’s interested... and it’s just broken out to new highs – so the uptrend is in place.  It’s time to check it out.

Unfortunately, it’s not easy to play... There’s only one liquid (over $100 million in market cap) way to play it from the States, the Thai Fund (TTF).  This fund trades at a 25% premium to it’s underlying value – so it’s a bad deal.

The other way to play it is to buy individual stocks in Thailand.  It’s not that hard, and U.S. brokers like my father’s firm (Dave Sjuggerud: 877-539-1004 dsjuggerud@lasallest.com) and International Assets (Jeff Winn 800-432-4402 jwinn@iaac.com) can buy them.

There are some big, great businesses in Thailand.  Massive Siam Cement is typical... It pays a 6% dividend.  It trades at a single digit P/E.  Yet the business has a 25% return on equity... sales have doubled since 2002 to $6 billion last year...  and earnings have doubled too.  Debt has been cut by more than half since 1997. 

If you’re looking for the world’s cheapest stocks, Thai stocks are definitely worth checking out.  They’re also ignored, and in a nice uptrend. 

When you combine those three things, you’ve got all the makings for a bull market.

Good investing,

Steve





Market Notes


NEW HIGHS OF NOTE LAST WEEK

Rayonier (RYN)… timber
Cemex (CX)… Mexican cement producer
Northern Orion (NTO)… copper and gold
Cresud (CRESY)… Argentine land play rises on huge volume
Armor Holdings (AH)… military supplier
Schnitzer Steel (SCHN)… scrap metal
Toyota (TM)… Japanese automaker
Bucyrus (BUCY)… mining and construction equipment
Transocean (RIG)… deep water drilling
Wynn Resorts (WYNN)… gambling
E*TRADE (ET)… gambling
Martin Marietta (MLM)… building materials
Silver, Zinc, Copper and any other metal you can think of
Japan, Canada, Germany and any other stock market you can think of


NEW LOWS OF NOTE LAST WEEK

Intel (INTC)… the world leader in semiconductors
iShares Lehman 20+ Year Bond Fund (TLT)… rising rates hammer ETF
Gateway (GTW)… computers
Live hogs, Live Cattle, Soybeans

New High of special note: China’s incredible demand for raw materials is sending the price of things like copper, cement, and zinc through the roof right now… and the companies who produce those raw materials are dominating the New Highs list.

Never in the past 500 years of world history have we seen a situation like the one taking place in China right now: The most populated country in the world has entered into a building frenzy to play catch-up with other industrialized nations.


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