Computershare: Like an Option on Stock Market Recovery

by: Global Investing Editor December 04, 2008 | about stocks: CMSQF.PK / CMSQY.PK    

Global Investing Editor

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

Like Warren Buffett, I believe you can safely assume that sometime over the next few years, the stock markets of the world will come roaring back. The Oracle of Omaha is long calls on various indexes to benefit from the comeback he foresees. Mr. Buffett gets his yields from special preferred stocks not available to mere retail investors in GE or Goldman Sachs (GS).

I want to get yields with my calls. Here is the answer.

Computershare Ltd. (CMSQF.PK), an Australian stock, is something like an option on stock market recovery paying a decent dividend. It is the leading global specialist in administration, trusteeship, and owner registry activities for companies with traded stock and bonds, not just Down Under, but all over the world. You may have run into the Computershare's name if you get dividend checks, receive proxies to vote, invest in DRIPs, benefit from rights offerings, or are contacted as a shareholder for some reason. Computershare is also the administrator of employee stock option plans worldwide and also trustee for many bond issues.

Business has been good in recent years, and the firm expanded rapidly by acquisition around the globe. It is paid a fee by the companies it provides services to. Thanks to its specialized software, Computershare is highly competitive in handling shareholder rolls.

Then in the wake of the Lehman bankruptcy, Computershare's stock price collapsed as stocks around the world started to shrink in value. It dropped far more precipitously than the Australian market overall. Part of this is a misconception. Paperwork does not simply stop being generated just because markets are down. Moreover, Computershare will gain business share as single-country competitors without its deep pockets run into difficulties.

As of this writing, the stock trades at under 8.5 times earnings. Computershare's yield is 3.5% and since most of its business is in America, its foreign exchange risk is hedged based on strategy rather than its homeland. If the savvy managers think Australian currency is rising, they will bank more of their fee income in Oz dollars; if they feel the U.S. is on the uptrend, they will keep more money here. Because its business is so close to the stock markets, they are more likely to get it right than I am but you should be aware of the risk.

There is a newly-created unsponsored 1:1 American Depository Receipt which trades on the pink sheets as CMSQY.PK. You can also buy the Australian stock in the U.S., because of course Computershare itself has created the trading facility. That is also 1:1 and is more liquid, with ticker symbol CMSQF.PK, also on the pink sheets. About 5000 of the directly-listed shares trade daily in the U.S. Computershare is a powerhouse in global share operations, not a pink sheet fly-by-night operator, even though its price is now well under $5.

Disclosure: Author owns 300 shares and is buying more.

Related Articles
Top Rated Comment Streams:

Numbers are net rating-

See all Top 100 »
More by Global Investing Editor

Investment Resources
Money Management
Research
Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Australia