Newsletter 50 – Titon - conclusion

The operating dangers, which merely reflect weaknesses in its strategic position, mean that Titon cannot be considered for the Warren Buffett style strong economic franchise portfolio.
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The only possibility is for inclusion in the NCAV portfolio.  It would qualify (just) under the ‘reasonable good’ qualitative factors – the business is fairly good with proven managers who coped with very tough times, and it is stable.

But it does not qualify under the quantitative criteria. I would therefore only buy if the share price fell to 51.6p, a 23.2% fall from the current price. We must be disciplined and let this one pass if it does not get down to 51.6p.

We can let lots of balls go past us, waiting for one that is in the best strike-zone.  We can stand at the plate quite a while, patient and disciplined, until we get a ball that we can hit out of the ballpark – we do not have to stretch.

Even if a lot of work has gone into getting to this point do not be tempted to lunge at a ball outside of the sweet-spot.  There will be plenty of good balls later.

This will go on my watch list. However I will not be selling any of my holding.  My reasoning for holding even though not buying were outlined in my final Fletcher King blog last month.  I must have a rule to stop me selling multi-baggers too soon and to stop losses through transaction costs and taxes.

At this price it has a speculative element, but that is quite small.

Final note
There is a suggestion from ‘Rainmaker’ on Titon’s ADVFN Bulletin Board that it might be taken over, possibly by Korean investors.

I accept that this is possible, but with over 40% of the shares held by directors and other connected persons, I think the more likely scenario is a return to profitability outside of Korea by a combination of managerial endeavour and macroeconomic recovery.

If anyone has further reasons for think that a takeover is more likely, please let us know. I’d like to be convinced.
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It is always healthy to be open to disconfirming evidence to a long-held view, and to drop much-loved ideas in the face newly revealed facts.