Guru: Alan T. Hill
Home: Placitas, N.M.
Web community: http://www.ValueForum.com
Track record: year-to-date 2006 Return: 92%
Specialty: International stocks, metals, Canadian trusts
In many ways, Alan T. Hill is living an individual investor’s dream retirement.
Back in 1999, while researching stocks online, he came across a little-followed NYSE-traded stock for one of Colombia’s biggest banks, Bancolombia SA. Having spent considerable time in Latin America during the 1980s as manager of international educational sales for Apple Computer, Hill knew more about the South American country than most Americans who equate Colombia with coffee beans and cocaine.
“From my travels and readings, I knew that Colombia had a high literacy rate and a very strong business community. It also had a huge problem with terrorists and army factions, and its drug problem,” says Hill, 67.
So Hill figured there were few better ways to play a turnaround in Colombia than a big bank, and he started nibbling on shares in 1999 at prices near $4. Unfortunately, inflation was still rampant, and gross domestic product was anemic, but there was serious talk of reform. By 2001 Bancolombia had fallen as low as $1.40. Hill stuck to his guns and added to his position.
Then, in 2002, Colombia elected a new president, Álvaro Uribe Vélez, and Hill was convinced that real change was coming. Uribe began cleaning up the nation, and the U.S. was pouring money in again. Bancolombia started to rebound as the nation’s GDP grew and inflation came under control. Eventually Bancolombia merged with Corfinsura, the nation’s largest investment bank, and Conevi, the largest mortgage bank. Says Hill, “Bancolombia was the seven-ton elephant in the nation’s fragmented financial sector.”
Hill’s research made him the resident expert on Bancolombia on ValueForum.com, a subscription-based online stock investor community where he is an active member. By 2004, Hill had amassed tens of thousands of shares of Bancolombia, and in mid-2005, after the price had reached $22, he sold enough of his CIB shares to raise $500,000. The proceeds would go to building a 3,200-square-foot pueblo-style retirement dream house in New Mexico, 1,300 miles away from his home in Indiana.
Today Hill is still actively investing, and, according to metrics tracked ValueForum, he has one of the best track records among its 1,500 members. He is leading the site’s 2006 stock-picking contest, with a year-to-date return of 92%.
These days, however, when Hill looks up from his computer screen, he gazes out onto idyllic landscapes surrounding Placitas, N.M. Looking out his windows to the East, he sees a clear view of the peaks of the Sandia Mountain range; out another side, he can view the city lights of Albuquerque 15 miles away. To the west he looks out on mesas for 40 miles, and from his north-facing windows he occasionally catches glimpses of wild mustangs roaming the hills of thousands of acres owned by the U.S. Bureau of Land Management.
As an online investor, Hill is no flash in the pan. He has been a member of the same Web community since the late 1990s, when his group defected from the Yahoo! message boards to subscriber-only ValueForum. According to the site, $10 invested in all of Hill’s ValueForum.com contest picks over the last 18 months would have grown to $24.50 today, versus $11.80 for a similar investment in the S&P 500. His “strong buy” recommendations have gained on average 85%, and his “buy” recommendations have gained an average of 151.87%, over an average holding period exceeding 200 days.
Says Hill, "When I retired I had a nice nest egg that I figured would be depleting every year. However I have added to it every year. In my personal portfolio I have had returns over 30% per year since 2001. I'm making more money in my retirement than I did in my working life."
In selecting stocks, Hill typically chooses a sector like energy or metals first, then favors fundamental analysis over technicals when drilling down. Many of his picks have modest price-to-earnings ratios and are dividend payers, and Hill is fearless when it comes to buying stocks not listed on major U.S. exchanges. Indeed, many of his holdings are Pink Sheet stocks priced below $10. One common theme running through his portfolio is that he likes companies whose business will benefit from global growth.
Like many other ValueForum community members, Hill has a significant portion of his portfolio devoted to metals, particularly junior gold mining stocks and Canadian energy trusts. He admits he has his share of losers as well as winners. A few energy trusts in his portfolio, including Trinidad Energy Services Income Trust and Paramount Energy Trust, are down about 20% over the last few months. He is also sitting with a loss in NYSE-listed Southwestern Energy.
One of Hill’s big themes for 2006 has been a continued bull market in zinc. For many years, zinc, which is used in galvanizing as an anti-corrosive in metals like steel, traded at about 50 cents a pound and was ignored. But zinc demand has exploded with the building and construction boom here and overseas, not to mention the fact that a typical automobile uses nearly 40 pounds of zinc in it. Today, China and India are fueling the boom in demand for zinc. Zinc now sells for more than $2 a pound, and Hill thinks it will keep climbing.
“What is unique about zinc’s use for galvanizing is that it is only a small part of the price of steel. So a higher price for zinc doesn’t hurt manufacturing costs that much. There is a great amount of elasticity in the price of zinc, and there isn’t that much capacity. They are reopening mines,” says Hill.
Hill did his homework and discovered a Toronto-based zinc mining company called Hudbay Minerals. Hill began recommending the stock on ValueForum, and since his initial recommendation in January 2006, it has climbed 241%.
Another zinc play in Hill’s portfolio is Melbourne, Australia-based Zinifex, a miner of zinc and lead that is currently operating at near full capacity. Its stock has climbed from about $5 per share to a recent $12 over the last six months.
Hill attributes his investment success mostly to his membership in ValueForum, which he logs on to each day for about two hours to trade ideas. “There are so many talented and interested investors talking about stocks that I feel like a chocoholic in a chocolate shop.”