The Great TFSA Race: Micro/value investor

Jin has had the most success with micro-cap stocks.

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From the December/January 2014 issue of the magazine.

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Photo by Jaime Hogge

Jin Won Choi, 31, London, Ont.

TFSA: $50,876

Portfolio: 43% Penny stocks | 57% Growth stocks

Software developer and designer Jin Won Choi has read every book by legendary value investors Warren Buffett and Benjamin Graham. Although Jin has invested in blue-chip and small-cap stocks, he’s had the most success with micro-cap stocks—those with a market capitalization of $50 million to $300 million.

“I find the micro-cap market is much more efficient than larger-cap markets because the smart money is usually too big to be bothered with such trifles,” says Jin. “It’s the same as in poker: Tables with larger minimum bets have smarter poker players. In the micro-cap space, I’ve often wondered if anyone had even bothered to read the financial statements before they sold shares to me.”

Still, Jin says he keeps finding opportunities in large-cap stocks too. In 2009, he bought General Electric (GE) for $5 a share and Bank of America (BAC) for $3. He also bought U.S. bank Wells Fargo (WFC) at about $15. “These were all beaten-up stocks,” Jim remembers. “They were at ridiculous prices in 2009. It was as if the world was collapsing, and P/E ratios were ridiculously low.”

Within the year, Jin had sold those stocks and taken his profits. He changed his strategy by looking for companies of all sizes with good balance sheets but not necessarily great earning power. Jin made some money on Google, buying it at $606 in early 2012 and selling six months later at $675. “I’m not afraid of investing in tech stocks, though I think they’re overvalued right now,” he says. In fact, he only owns one such stock: Intel (INTC).

Jin also owns Calgary-based Perpetual Energy (PMT), which mostly produces natural gas. “It was a dividend darling a few years ago, but recently it cut its dividend,” he says. “I love a dividend cut. As long as the company can put the money to good use, I’m okay with it.” Although natural gas prices had dropped, Perpetual still held plenty of valuable land and several gas plants, Jin explains. He also owns Coach (COH), the U.S. handbag maker, and several penny stocks that total about $22,000.

From his home in London, Ont., he’s also watching the South Korean market, where he sees opportunities. “I’m Korean myself, and Buffett says Korean stocks are cheap and South Korea is one of the world’s most attractively priced markets,” Jin says. “I’m just tracking the index right now and waiting for a small financial crisis there before I invest.”

Another investment angle Jin is exploring: the effectiveness of pay walls in the newspaper business. “I think people will see huge value in a well-researched story and pay for it,” he says.

Jin’s goal is to reach $1 million in his TFSA within 20 years. “But I won’t withdraw any money,” he vows. “It would be like killing my baby. Having said that, I’d really love an Aston Martin one day.”

The Great TFSA Race

Penny-stock investor: Jim Nykyforuk, 38, Kelowna, B.C. – $300,000

Small-cap turned dividend investor: Dale McSween, 64, Cornwall, Ont. – $61,700

Bottom-feeder turned income investor: Jean, 80, Sarnia, Ont., and his financial planner Jeff Burchill – $72,212

Value investor: Nathan Moncrief, 26, Winnipeg – $60,500

Conservative income investor: Paul Boughey, 49, Cambridge, Ont. – $48,300

Risk- averse DIY income investor: David Boult, 57, Stittsville, Ont. – $46,350

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