Tuesday

The Inflationist Challenge 2009, TheInflationist StockPicks

TheInflationist Eyes Old Flame Charter Pacific (CHF)

Theinflationist is watching - this time our attention is on two companies trading below cash backing. We have previously been shareholders of CHF in the past during the days of Metal Storm (MST) and Chemgenix (CGX) - but sold out soon after they paid about $6 mil for www.bollywood.tv (not profitable) and retained the founders for $200k a year. The share price back then ranged from 25-35c. We did some initial research into bollywood back then, and decided that we were not huge fans of it (not for $6mil). TheInflationist is not bullish on India, nor on internet video websites which face competition from free torrent sites. If Hollywood struggles to clamp down on online piracy, would Bollywood stand a chance? TheInflationist did a small sample size research interviewing 20 (Yes, very small number and not statistically significant) Bollywood followers - none have heard of bollywood.tv and ALL download their latest video online free with torrents. TheInflationist then tried to do some marketing for CHF (after all we held CHF shares back then), and introduced them to Bollywood.tv. The response was not encouraging. They were quick to point out so many reasons why their current download source was superior - we only needed to hear one: they were free. We got out of CHF then, and witnessed more poorly timed investment decisions. But since then, CHF is trading at 8c - and here’s why we are planning to buy some:

• Trading below cash, market cap of $5mil, $8.3 mil cash and no debt - Buffett tick
•  9 options for 10 shares held, record date 2 Feb 2009 - 2 year options exercisable at 12c. 
• Director loading up.
• Good founder-run management (some would disagree but TheInflationist believes in the management of founder Mr Kevin Dart)

TheInflationist do not have any CHF holdings- with the ASX down 3%, we are hoping for a forced seller to take it further down to the 6-cent mark. A definite buy at 6.1c - may even nibble at 8c. More on the second company in our next article.

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