Five Value Stock Picks From Ken Fisher of Fisher Investments

 |  Includes: BRK.A, FUN, GMKYY, MEOH, NZTCY
by: SA Editors

Forbes Investor Advisory Institute hosted a Financial Round Table discussion on June 30, 2007. Many of the comments were directed to the increasing globalization of both business, and financial markets.

From the Roundtable, hosted by Wally Forbes, here's an excerpt from Kenneth L. Fisher, Founder and Chief Executive Officer of Fisher Investments, which manages over $40 billion in assets for high net worth individuals and institutions:

fischerKEN FISHER: I like a whole lot of different things right now.

One is Methanex (NASDAQ:MEOH), which is a single play, single commodity, specialty chemical company that shouldn't be an independent firm. There's no reason in the world for this company being a stand-alone play. It makes MTBE, which is the former, widely used gasoline additive that has been banned in the United States completely. That ban has driven the price of MTBE from $1.80 down to $1.00 a gallon.

This company is the leader in the world in this single product selling at a P/E of 2008 earnings of 9X, which is an earnings yield of more than 10%. And, they have no defenses against a takeover. This is an easy thing for a bigger chemical company to buy and fold in. It's got a $4.5 billion market valuation. It's completely bite size, and I don't think two years from now this company is going to exist.

Another company that's a completely different kind of a concept that I like a lot is smaller, more in the $1.5 billion range, is Cedar Fair (NYSE:FUN). Cedar Fair is in the amusement park business. They own a wide arrange of amusement parks from Marriott's Great America to Knott's Berry Farm in California, to Carowinds in North Carolina, to Cedar Point in Ohio. They also own hotels that go with those amusement parks.

But the stock sells, in my opinion, under the presumption that high gasoline prices is going to discourage people going to these places this summer. And this is a company that gets all of its earnings in a few months. Those kinds of concerns are just the type that make people's knees knock.

But I'm convinced from work we've done that the consumer isn't isn’t going to let up at all. So if the consumer isn't letting up at all and you get a strong summer, this company can make enough money to make the stock really cheap. Like the symbol says, it’s FUN.

Another one that is a completely different type than the others that I've talked about is Lubrizol (LZ). It could be a takeover target but I don’t think so. This is a quality company with everything going its way. It's on a roll. It's sells at about 18X earnings, so it's not expensive but it's not terribly cheap either. It's growing nicely.

It's continuing to beat people's expectations, and I think it will continue to do so. You could almost think of it as a not too expensive momentum growth company. Not a high growth company, but the kind of thing that somebody can be comfortable with because they truly are the leader in all of the parts of a wide array of applications like lubricating gears, and working parts in both complex industrial engines and everything related to refineries.

Since I'm very optimistic about energy prices, I'm very optimistic about everything in the energy sector, and that ripples over to benefit Lubrizol.

Another one that I like in a different way is Gruma S.A.(GMK). This Mexican company is the world's leader in corn flour tortillas. You’ve got a long-term feature that I think is good, though I don't think it is important to the stock right now. That is that this is sold into the market for Hispanic food, and the Hispanic food market. This is a rapidly growing market because the Hispanic population in the United States is growing and getting more economically healthy at a fairly good rate and also because non-Hispanics are increasingly liking Hispanic foods.

You go into the supermarket and you see all kinds of Hispanic foods that you never saw 15 years ago, and that trend I think will continue. But I don't think that's what drives the stock. I think what drives the stock is people are scared to death of corn prices. They're scared to death because of everything that relates to the ethanol phenomenon, which ultimately I see as idiotic in the sense that there's no there there when you look at ethanol.

So, I think when people get realigned on this, they'll see that there isn't a need to be fearful of corn prices relative to this company’s business. The fact is that even if corn prices go higher these people would still do very well. So, I like the stock.

Finally, Telecom Corp. of New Zealand (NZT) is under severe pressure. It has a 6.7% dividend yield. The part I like about this is that people are scared of the stock because the New Zealand government's been on the attack, and has been threatening to structurally break up the company. The decision is immanent, but I don't think that they're going to make any such decision.

I think what they're going to do is create a holding company and break up the operating lines under the holding company. At 10X times earnings the stock is cheap. I don't think this is a rapid growth play, but once they get behind them this process with the government, which is immanent, I think the stock will rise.

And I think people are just scared away because they're scared of the bludgeoning from the New Zealand government. Now this is a regional play. But if they successfully get through this process with the government, I think you can easily also see the company taken over.