Balda is a German company that makes plastic cases for mobile phones and medical equipment. It also owns a 17% stake in a Taiwanese company called TPK that manufactures touch screens for iPads and smartphones. We see that stake alone as being worth 11 Euros per share. With Balda currently trading at around 6 Euros, we're getting the value of the Taiwanese company plus Balda for free.
Looking Ahead
It's clear that the U.S. is not going to be the last sovereign nation to see its credit rating downgraded. More are coming, and probably sooner rather than later.
The best advice FAs can give their clients is to stay calm and act based on common sense, not fear. Even with more sovereign nation credit rating downgrades, almost no country (with the exception of perhaps Greece) - especially the U.S. - is really in danger of default, but that probably won't prevent another round of panic selling.
Currently, we're sitting on about 25% cash in our portfolios. This enables us to take advantage of buying opportunities as they present themselves. However, just because investors are selling indiscriminately doesn't mean we will be buying indiscriminately. We'll continue to do what we've been doing: nibbling around the edges and scooping up the treasures that get thrown out with the trash.
One of the truisms of investing is that in a panic, people always go home. In other words, investors stick to holdings in their own countries and dump everything else. That creates volatility but also opportunity.
FAs should be preparing for those opportunities now. If they and their clients wait for everyone else to come back, those stocks won't be available at bargain prices. In investing, as in life, if you're the first one to the party you have your choice of what you want. If you're late to the party, all that will be left is what others didn't want.
David Marcus is chief executive officer and lead portfolio manager at Evermore Global Advisors, a mutual fund manager using an active value investment discipline to find undervalued companies around the world.