Jim Chuong, 38
Occupation
Pharmaceutical Sales
The Portfolio
Berkshire Hathaway Inc., Fossil Inc., Buckle Inc., K-Swiss Inc., Columbia Sportswear, American Eagle Outfitters Inc.
Jim Chuong focuses on companies such as Columbia Sportswear, Fossil (watches, handbags, accessories), and Tootsie Roll Industries Inc. (yes, those Tootsie Rolls). What do they have in common? They tend to be small, U.S.-based, and fiscally well-managed by hands-on – and financially motivated – founders.
Why he Bought During the Recession
“A lot of the companies I was watching saw their price-earnings multiple drop to 10 or less, and their price-to-book fall to 1 or lower. They just became really cheap relative to their earnings and their book value.”
How He Screens
Mr. Chuong used to begin screening for stocks using financial metrics, but he now begins by looking for companies with a high level of insider ownership. “It’s their money, so they run the companies well,” he says. With such companies – often large-scale, owner-operator undertakings – he says he almost always finds attractive financials, including low debt loads, good margins and strong return on equity.
His Take on Insiders
When insiders hold a good deal of stock, he says, they tend to hold expenses and even their own salaries in check. “They don’t pay themselves $10-million bonuses and buy fancy jets and then load up with debt to make themselves look better.”
Best Move
Given its recent price of about $70 (U.S.), his first purchase of Fossil Inc. in 1998 for a split-adjusted $7.50 a share is on the cusp of being a ten-bagger.
Worst Move
Sports footwear maker K-Swiss just hasn’t come into its stride. Although he’s held the stock for five years, he’s down around 50 per cent. “I’m learning that to compete against adidas or Nike you have to find a really small niche.” However, he’s planning on hanging on, unless the owner dilutes the stocks or ignores the need to produce in China to be cost competitive.
Advice
“It’s pride and hubris that will kill a business.”
Special to The Globe and Mail
Want to share your strategies? E-mail: tony.martin@sympatico.ca
