Stock Picking From Israel - A Distant Point of View
Ami is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Searching for good investments is difficult when you're physically far away from the markets. I live in Israel and don't have the daily intimate discussion of the American economy, newspapers and financial TV buzzing and humming around me.
This may turn to be an unexpected advantage if you think about it. I can look at stocks in a different way and tell you what I found.
They say you're in a bubble when you get stock tips from the taxi driver. I think we may be in the reverse situation because people ask me for tips on buying puts. Some strong and stable companies are always a good investments and if you search, you will find some real gems. The companies in this article are strong and growing stronger.
Take CF Industries (NYSE: CF) for example, this company is not in the high tech industry (I am, I'm a programmer) it is an industrial creature, feeding the crops - they make fertilizers, this is a stable industry - people will always need more food, and the food people like, needs to eat too... The world population is growing faster than expected and some of the largest populations are experiencing a fast improvement in their standard of living. Billions of people are moving away from poverty in the villages to better life in cities around the globe and CF's fertilizers are in strong demand. CF is one of the best managed companies in their field, with a high net profit margin of more than 30% and a smart management aligned with shareholder's interests, top management of the company are major shareholders of the stock so when the company is doing well, so will their portfolio.
|Company||Net profit Margin||
5 year net income growth
|Yongye International Inc. (NASDAQ: YONG)||23.3%||180%|
|CF Industries Holdings, Inc.||30.5%||115%|
|Potash Corp. (NYSE: POT)||30.3%||37.6%|
As you can see in the table above, Potash has a high net profit margin similar to CF at over 30%, higher than the other two companies in the table, but when looking at the 5 year growth in net income, there is a wide gap between the two.
Yongye has the highest 5 year net income growth, at 180% but only 23% net profit margin, so CF is the best of both viewpoints - the current profit margin and the longer term 5 year growth.
Another interesting stock is Ansys Inc. (NASDAQ: ANSS) They are a unique high tech company. They make high-end simulation software. I used to have a start up developing advanced computer hardware and we couldn't make a lot of progress without really sophisticated simulation tools. Ansys tools are high end and priced accordingly. They are the infrastructure of high tech innovation. Their net profit margin is 25%, much higher than the paltry 8.6% for Cadence Design (NASDAQ: CDNS) while it's 5 year EPS growth rate is 59.5% per year while Cadence's EPS is unstable and declining. Net income growth rate for Ansys is 66% while Cadence's is in the red. High tech is not going away soon. These tools are used in a wide range of fields from helping design the next generation of smart phones and tablets to solar power panels and making energy drink soda cans that look different than other soda cans while still using minimal metal for efficiency's sake.
So from this remote relatively quiet (at least financially quiet) corner of the globe, I see a bright long term future for these stocks. I'm no Warren Buffett, I'm only human, so I plan on holding these stocks for a few years - not forever.
Ami Heines owns shares of CF Industrial Holdings and Ansys. The Motley Fool owns shares of CF Industries Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.