market folly

Next up in our notes from Invest For Kids Chicago 2013 is Dinakar Singh of TPG-Axon Capital.  He presented two long ideas: Hitachi and Daqin Railway.


Dinakar Singh's Presentation at Invest For Kids Chicago

•    Global fund – but pick best few dozen ideas
•    Average multiple of 14 is misrepresentative as some sectors are trading above historical number
•    Asia is discount of world
•    Many cyclical stocks in Asia trade at low multiples
•    Japan is seeing company change in some companies
•    At US with high prices with high margins
•    % of index trading at single digit multiple chart (very low in US and 32% in Europe and 30% in Thailand, and 27% in Hong Kong)
•    Likes to use auto sales for a proxy on where an economy is
•    Big recovery is over
•    Companies have restocked
•    Margin trend in Russell 3000
•    American listed companies has  come from interest and taxes – EBITDA margins are lower
•    Climb becomes harder when rates begin going up
•    Own 30 stocks and 5 happen to be US


•    Idea #1: Hitachi (Japanese) 
•    New CEO in 2008 was a change agent (even though insider)
•    Sold entire consumer business
•    Investing in healthcare equipment like Emerson and Phillips
•    Valuation is different than Emerson and Phillips
•    Hitachi has made tremendous process with margins at 5% yet could they double
•    Far more ways to win in terms of earnings
•    CEO boosted buybacks dividends


•    Idea #2: Daquin Railway (601006 CH) 
•    P/E multiple is half on union pacific at 8.2 versus 16.3x for Union Pacific
•    Good balance sheet
•    Good management and 6% dividend yield
•    Every year they should grow profits
•    Dividend should be growing
•    Could get tariff growth form coal
•    Rail rates could be up significant


Check out the rest of the hedge fund presentations from Invest For Kids Chicago here.