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My Second Investment Winner
I bought Nu Horizons Electronics Corporation (NASDAQ:NUHC) stock at US$3.3461 on 23/03/2010 and sold at US$6.8901 on 21/09/2010. Considering the transaction cost of buying and selling, I made 92.8% profit.
I happen to know about NUHC when someone in the value investing community mentions it as the means of buying it in the form of undervalued stock. Most of the time, I always check every suggestion given by anyone. About 99% of time, I did not buy the stocks that were suggested by anyone. As for NUHC case, it is really exceptional one. I find that its balance sheet and cash and cash equivalent position to be extremely strong enough to buffer any possible shocks. Not only that, it is severely underpriced by the market. Although it may not be best comparison but rough one, I compare NUHC with its two closest competitors namely Arrows and Avnets. The latter two have higher share price than NUHC and bigger distribution network as well. Despite of disadvantage of bigger distribution network, with superb distribution presence in Asia especially China, I strongly feel that its business value should have, more or less, half of the share price of that Avnet or Arrows. Given all these reasons, it seems that there is very large margin of safety.
Losing the major distributor contract with Xilinx, Inc, which has brought the highest percentage of revenue to NUHC is actually not a big deal. It is because NUHC is able to return Xilinx products back to Xilinx, getting the cash back based on the agreement. Based on my purchase, I consider three reasons as a form of catalyst. The first reason is that despite of short tenure of former NUHC CEO, Jim Estrill, the presence of new CEO may bring something interesting to NUHC. In my point of view, it is quite wise to appoint Martin Kent, who has experience in leading electronic firm in high level managerial capacity (just few months after my purchase of NUHC).
Second reason is that NUHC has been strengthening its relationship with its existing suppliers so as to be able to distribute their products with greater coverage of distribution in all areas NUHC is at. With strong distribution presence in China, it is sooner or later that manufacturing powerhouse tag will go to China.
Third reason is that NUHC is taking up such measure to ensure that no single supplier represents more than 10% of sales because it cannot guarantee that they will discontinue the working relationship between both of them. It is correct measure to do so.
In one of the conference call, a guy asked NUHC to do some marketing on itself so as to raise the public's awareness on NUHC. This attempt may raise its share price beyond US$4.50. That is if i recall correctly. NUHC appreciates that guy's suggestion but I don't foresee whether it is really planning it in action. With NUHC's inability to push its share price beyond US$4.50 this year, my rough sell expectation should be at least three-quarter of my perceived business value of NUHC.
However, the analyst of selling NUHC turns out to be unexpected one. I never expect that its direct rival, Arrows will make an agreement with NUHC that the former will buy whole shares of NUHC at $7 per share in cash. Upon hearing this announcement, I am preparing to hold it until shareholder meeting that the board of directors from NUHC require shareholders' approval on this merger agreement. On the next day onwards, news comes out with the fact that many law firms are investigating this merger agreement in the question of whether the NUHC's board of directors has not done its fiduciary duty such that the offer price of $7 per share may be low despite of around 100% rise from US$3.49 last two friday ago. I am stunned. Things can go wrong since lawyers may be capable of finding material evidence to prove it so. In my mind, Martin Kent used to be CEO of Abacus Group Plc that was merged with Avnet. Now, he has done it again, leading NUHC to merger with Arrows. To me, it is quite irony although it is reasonable for Arrows to acquire NUHC due to its strong Asia presence.
Therefore, not wanting to feel all kind of uncertainty in my head, I sold it. My next concern right now is what I should do with sale proceed. I cannot find any new investment at this moment while looking for new ones carefully. I want to use that proceed to buy more shares which I have already own now but time is not right. The economy picture is quite rosy now, sending most of the share prices up. Most likely, I have to wait for the chance to make a new investment or buy more shares from companies that I have partial ownership in the right time.
Book
Book Title: Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance
Author(s): Charles W. Mulford and Eugene E. Comiskey
Rating: 9/10
Remark:
It is very good book, explaining why, what, where, and how to analyse cash flow. It explains why we need to be cautious on the definition of free cash flow that is adopted by financial/accounting professionals in their working place. This book is definitely better than their 'Financial Number Game'. It brought me so much insight about cash flow analysis and various definition of free cash flow. It is required to have some accounting knowledge to understand this book.
Movies
Robin Hood (Hollywood Movie 2010)
Synopsis:
The story starts with how Robin Hood comes about. The battle between England and France has not yet ended until the plot that is devised by the king of France is about to be hatched. Robin Longstride manages to unite all Englishmen to fight French army. In the end, the king of England does not fulfill his promise, declared that Robin Longstride as a criminal, which is known as Robin Hood.
Rating:7/10
Remark: It is fairly nice action. There is one scene that reminds me of World War 2 scenario at Normandy.
Iron Man 2 (Hollywood Movie 2010)
Synopsis:
Tony Stark has revealed himself as Iron Man to the public. A person, who knew Tony's father, wants to show his own verison of Iron Man to fight Tony Stark. Which verison of Iron Man will prevails?
Rating:7/10
Remark: exciting matchup but the excitement in Iron Man 2 is not at the same level as its first installment.
The Last Templar (Hollywood TV Movie 2010)
Synopsis:
This TV movie adopts from a fiction storybook. Tess Chaykin is trying to satisfy her interest to find an item that justify the existence of Templar knights, which are flattly rejected by Christianity. Her interest piques by the incident that has happened in the museum. In that incident, there are four masked robbers dressing as templar knights stealling antiques on spot in front of the eyes of important guests.
Rating:6/10
Remark: The story looks good but there is no suspense or excitement to feel of.
The Expendables (Hollywood Movie 2010)
Synopsis:
With many action superstars, the story is based on how a team of mercenaries deal the missions assigned by its clients. There is one special mission that the leader of the team cannot forget. Emotions can cost a person's life. Can he control his emotion and do something that he has never done before as mercenary?
Rating:6/10
Remark: Interesting strategy but below par story
Knight and Day (Hollywood Movie 2010)
Synopsis:
Roy Miller, who was thought to be rouge secret agent, is trying to escape from gang and real rouge secret agent with a special item that can power a city alone. The gang and real rouge secret want that item. Accidentally, he somehow drag a female innocent stranger, June Havens into the picture. Every action Roy makes is entirely surprise to June. When does that surprise cease to be normal affair to June?
Rating:9/10
Remark: Interesting story with clever jokes.
Baker King Kim Tak Goo (Korean Drama 2010)
Synopsis:
Within 30 episodes, the story starts with how Kim Tak Goo is born. Despite of family conflicts, Kim Tak Goo uses his talent - his ability to smell in order to identify the nature of the food as well as state of the food, which normal humans do not have- to be a baker. Ma Jun is jealous of Tak Goo because of many reasons such as his 'not real' father giving praise to Tak Goo, which the former has not done it before to him. Ma Jun sets his life to complete Tak Goo in order to be better baker than Tak Goo for sure. Who prevails?
Rating:9/10
Remark: Excellent story, excellent character of Kim Tak Goo. It is little wonder this drama has broken the viewing rating record in Korea.
Tony Del Piero wrote and posted at at 2:50 pm
