South Korea – value investor’s dream ? (plus Top 20 Korean BOSS Score stocks)
At the moment, the Japanese Stock market seems to be “red hot”. Finally, after 25 years or so, Japanese stock seem to be one of the top stories. Honestly, I do not really understand why. Despite the Japanese Finance Minister targeting actual Nikkei levels, I was quite disappointed when I ran a couple of Japanese stocks through my “Boss” screen.
Although many Japanese companies trade at significant discounts to book value, the problem is with Japanese companies that their returns on book value are extremely low. Many companies over time even are actively destroying value. Dividend payouts are extremely low and shareholder activism is not really an option for Japan Inc.
Out of curiosity, I started to screen Korean companies with my BOSS model as well. Before jumping into the list of the most interesting companies, let’s review a few facts about South Korea:
Somehow “under the radar”, South Korea has been one of the most succesful economies over the last 20-30 years. Even the Asian crisis could not stop the South Korean economy from growing at around 5% p.a. since 1990.
The countries’ economic position compared to Japan is very healthy, Debt/GDP is only 30%, the Government currently runs a surplus and the current account is of course positive.
Korean stock market
According to Bloomberg, there are currently 1973 traded stocks. Interestingly, this means that there are 600 more traded stocks than in Germany. The market cap of the major Index KOSPI is ~1.100 trillion won or around 760 bn EUR, almost equal to the German CDAX (820 bn EUR) or 2 times Apple…..
20% of the Index alone is giant Samsung electronics, followed by Huyndai with 4.3% and Posco at around 3% index weight. For some reason, Bloomberg shows a trailing P/E of 26 for the Kospi, however the forward P/E is estimated at 10.3. Price Book is a cheap 1.1, dividend yield only 1%.
First results from the Boss model
So far, I have added 160 South Korean stocks to my database. The first results are quite interesting. Sorted by the 10 Year Boss Score, i get the following Top 20 stocks:
|Name||BOSS 10Y||BOSS 5Y|
|MI CHANG OIL INDUSTRIAL CO||436.0%||577.2%|
|KYEONG NAM STEEL CO LTD||403.0%||262.9%|
|SEOUL CITY GAS CO LTD||324.5%||226.0%|
|GS ENGINEERING & CONSTRUCT||272.8%||199.1%|
|INDUSTRIAL BANK OF KOREA||258.6%||199.9%|
|OCI MATERIALS CO LTD||255.0%||403.8%|
|KYUNGDONG CITY GAS CO LTD||230.4%||270.7%|
|NICE INFORMATION & TELECOM||229.5%||185.0%|
|SAMYOUNG M-TEK CO LTD||219.1%||227.9%|
|HANNET CO LTD||217.9%||154.4%|
|MK ELECTRON CO LTD||213.1%||190.2%|
|HANIL CEMENT CO LTD||201.5%||103.4%|
|WISCOM CO LTD||197.8%||284.7%|
|SAMYANG GENEX CO LTD||191.9%||65.3%|
|KYUNGDONG PHARM CO LTD||190.9%||135.4%|
|BUSAN CITY GAS CO LTD||184.6%||185.4%|
I only superficially checked the companies, but some look interesting:
MI CHANG OIL INDUSTRIAL according to Bloomberg seems to be the Korean Fuchs Petrolub, Fidelity is owning 10%.
KYUNGDONG PHARM CO LTD has among its shareholders Delta Lloyd (10%) and Baupost (5%)
One of the big issues with Korean stocks is that only very few of them are listed outside Korea. Out of the top 20, I only found Posco with a meaningful foreign listing. It seems to be possible however to open a Korean trade account as a foreigner. E-Trade Korea for instance seems to offer this service but I haven’t tried contacting them yet.
Anyway, I think I will need to do some more research into Korean stocks but I think the list is already a very good point to start.