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Breakfast with an Investment Legend

By Dr. Steve Sjuggerud
Thursday, January 25, 2007

This morning, I had breakfast with Peter Churchouse. It was the first time we talked, and I'll share with you what we talked about.

But first, who is Peter Churchouse? He's a bit of an investment legend to me. And in meeting him today, I can tell you, he's still got it.

Peter didn't know it, but I learned about making money in China, Asia, and emerging-market real estate from him back in the early 1990s, when emerging markets were first becoming a real investment class.

Back when I was 23, not knowing much but trying to keep a global mutual fund running, Peter Churchouse was my secret weapon in Asia... Whenever the boss would call, I'd cobble together what Churchouse said with some news and whatever else I'd read and give an answer. 

I used to read Churchouse's stuff every week in the Morgan Stanley "Investment Strategy" paperbacks (it was in the days before e-mail). I'd read Barton Biggs first. And then Hong Kong-based Peter Churchouse.

As Churchouse walked my way this week at a real estate conference here in Japan, he glanced my way and said "Steve Sjuggerud? Really? I wondered when I was going to end up meeting you somewhere in the world. I'm a subscriber!"

I was flattered. 

Churchouse, it turns out, is a very interesting guy. He was born and raised in New Zealand. Then he headed to South Africa to live and work. (He's a surfer like me, and he went there in the early 1970s specifically to be able to surf Jeffrey's Bay every weekend for 18 months. These days, he races his sailboat more than he surfs.)


We covered a lot of ground. Peter's talked about buying Hong Kong-listed property companies as a way to play the China real estate boom. At the same time, he mentioned that he agreed with me about emerging markets being due for a correction and he had lightened his load last month. He also talked about China "buying up" Africa so it can secure its commodity needs for the future.Eventually, he ended up in Hong Kong as Morgan Stanley's Asia man for a long time. He left Morgan Stanley to start an Asian real estate stock hedge fund. Those investors are in good hands.

Peter shared one story about a recent trip to Thailand... He was in Phuket, Thailand, for a sailing race and visited some companies before he raced. They basically met his criteria for buying – low valuations and high growth rates. But he figured there was no urgency, and he'd get to it after the race.

Boy, did he get lucky. The Thai government surprised the markets and issued a ridiculous announcement to try to weaken its currency. Thai stocks got crushed.

Peter hadn't put the "buy" order in yet – and saved himself the loss of serious money.

We also talked about Japanese real estate. We agreed that a mountain of money is just about to flood into this market. The amount of money is so large, we'll see deals done that simply don't seem to make any sense.

I believe that Japanese real estate is a speculative bubble that is just about to start getting blown up. Peter and I were trying to pinpoint just where you can make the most money safely here. 

We agreed that the "value" stocks seem to be the smaller stocks without strong "Old Japan" connections. I'll be meeting with these companies in the next few days.

Peter Churchouse was an impressive guy – and I already had high expectations for him. I look forward to spending more time with him in the future.

If you're an institutional investor or an accredited individual investor and want to invest in Asian real estate (including Japan and China) you can reach him at peter.churchouse@limadvisors.com. You'll be glad you did.

We definitely have more DailyWealth to come from Japan... I hope you don't mind...

Good investing,

Steve
 




Market Notes


TELECOM: FINALLY LEADING THE MARKET AGAIN

It's taken seven years, but telecom stocks are finally leading the market again.

Driven by the awesome demand for high bandwidth capabilities, like music and video downloads, the telecom sector is treating shareholders to big returns right now. As billions of people join the developed world, they'll want to use cell phones, send text messages, and watch Internet videos.

What's more, most of the providers of telecom services are cheap and offer high dividend yields. American telecom Verizon yields 4.3%. Aussie telecom Telstra yields 6.2%. Telecom New Zealand yields 5.2%. And as you can see from today's chart, investors are piling in, and the stocks are steadily moving higher.

If there is a stronger, more well-defined uptrend taking place in the market right now, we have not seen it.



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