Weiss Korea Opportunity Share Discussion Threads

[praipus] 13/6/2013 14:57

Korea ETF



anley any idea if there is an inverse to this ETF?

[anley] 13/6/2013 14:14

The recent price movement shows the way the share price will move in these troubled times!

[praipus] 05/6/2013 16:41

Seeing the mention of Ruffer in post 27 I thought I'd track Ruffer's other holdings on the WAM thread too.

[davebowler] 05/6/2013 15:30

hxxp://www.fundweb.co.uk/1071997.article?cmpid=fsissue_250892865&cmptype=How+long+can+the+corporate+bond+party+last%3F

[anley] 04/6/2013 09:32

I agree........

[hoveite] 03/6/2013 19:41

anley,

Have you noticed that another thread had been started for this share?



I'd suggest using that one if you are interested in discussing WKOF as it is likely to have more people following it since it has more posts than this thread.

As the FT article notes Korean preference shares are a somewhat esoteric asset class, so I doubt there will be enough interest to sustain two threads.

[anley] 03/6/2013 15:33

There are some interesting large shareholders in for the medium to long term ride.

[anley] 03/6/2013 15:32

The FT 1st June had an interesting article on this investment trust quoted on AIM.

I have bought today - above NAV - just to see how this share performs. I plan to add as and when.

Good trading.................

[davebowler] 03/6/2013 15:27

Thanks Skyship ,- how come you didn't get a digital telling off for cutting and pasting!!

[skyship] 03/6/2013 08:14

.....and here is the missing final para:

It is deeply contrarian stuff, but titter ye not; institutional investors in this fund include outfits like Ruffer, Henderson, Miton and Advance Emerging Capital, all of whom know a thing or two about adventurous stuff. One added bonus is that in four years' time shareholders will have the opportunity to elect to realise their investment at NAV less costs – which should provide some comfort for investors worried about this fund vanishing into oblivion. You can find more details about this product at www.weisskoreaopportunityfund.com .

[davebowler] 02/6/2013 10:11

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [e-mail] to buy additional rights. http://www.ft.com/cms/s/0/d8200930-c772-11e2-9c52-00144feab7de.html#ixzz2V34Bunoj

The second is much more esoteric. It's the Weiss Korea Opportunity Fund, a small recent issue from US fund manager Weiss that focuses on Korean preferred shares, and recently raised £105m on the Alternative Investment Market to invest in such securities. I can't imagine that you've heard much about this unique opportunity, as no one I know has a thing for South Korean equities of the normal ilk, let alone their preferred cousins.
That's a shame. This market – still officially classed an emerging market by MSCI – is currently trading at close to single-digit PE ratios, with valuations on some counts even lower than Chinese shares. The market is dominated by conservatively run conglomerates known as chaebols, which are quite insular and often connected with each other through cross-shareholdings. As well as the ever-present tension with North Korea, these companies have suffered lately because of "Abenomics"; in the battle for exports, a weaker yen, it is reasoned, will benefit the likes of Toyota and Sony at the expense of Hyundai and Samsung. But if you thought the ordinary equity of Korean companies was under-valued, just take a look at their preferred shares.
Preferred shares are common in Korea. They allow a dominant shareholder to raise fresh money without giving away management control. The term "preferred" is a misnomer, as you're no higher up in a company's capital structure than the ordinary shareholders. What you do get is fewer voting rights. Basically, they're disenfranchised common equities, and that lowly status is reflected in the preferred share prices, which trade at monumental discounts to NAV.
Weiss observes that Hyundai's common stock trades at 5.5 times its estimated profits for 2013, with a yield of 0.9 per cent, but its preferred stock trades at around twice earnings, with a yield of around 2.5 per cent depending on which issue you buy into. So, here's the bet: very cheap stocks, in a cheap market, with poor governance and a risk that North Korea could zap it all tomorrow.

[hoveite] 01/6/2013 10:55

WKOF gets a mention in this weeks "Adventurous Investor" column in the FT.

[topvest] 30/5/2013 11:13

Yes, interesting. Not sure investing at this price is sensible though. Looks like we have missed the boat!

[davebowler] 30/5/2013 10:43

Name NAV per share ISIN NAV DATE
(Pence Per
Share)
------------------------ -------------- ------------- ------------
Weiss Korea Opportunity 103.34 GG00B933LL68 28 May 2013
Fund Ltd.
------------------------ -------------- ------------- ------------

NAV is up 5% since float.

[davebowler] 30/5/2013 10:41

The obvious parallel is Japan for their currency depreciation which h as been outweighed by their share price rises ,Yieldsearch so I think the lack of hedge is fine.


http://www.ft.com/cms/s/3/b00144f2-c77a-11e2-9c52-00144feab7de.html#axzz2UldkXmon
Interesting article.Thanks.

[yieldsearch] 30/5/2013 08:57

Lex FT article on korean prefs shares ( "Korean anomalies: updating preferences" ).
also any thoughts on #4 above?

[davebowler] 29/5/2013 08:16

Yes, it winds up in 4 years so the exit is clear enough so even if it becomes an orphan fund the share buyback plus limited life should take care of it.

[topvest] 28/5/2013 20:37

I've taken a look at this, but will give it a miss for now. Three things concern me; the premium valuation, the Weiss AM fee is double what is should be (i.e. 1.5% per annum); and this has all the hallmarks of being an orphan fund in a few years time. Of course, Weiss may have found a great investment opportunity, but I'm not 100% sure as although preference shares are undervalued they don't appear to offer a meaningful yield. Any thoughts?

[davebowler] 28/5/2013 15:49

That's a great find and a succinct summary hoveite;

Light and Heat at the Ira Sohn Conference


By Alon Bochman, CFA

Categories: Alternative Investments



"One cool judgment is worth a thousand hasty counsels. The thing to do is to supply light and not heat."
– Woodrow T. Wilson.

"When you can't make them see the light, make them feel the heat."
– Ronald Reagan


I had the pleasure of attending the 18th Annual Sohn Investment Conference in New York on 8 May 2013. Sohn has been called the "Super Bowl of investor conferences" because it consistently attracts the brightest hedge fund luminaries, as well as some of their most moneyed followers (tickets run up to $100,000 a head). This was my first time attending Sohn. As I entered the regal Avery Fisher Hall at Lincoln Center, I felt a bit like Nick Carraway entering Jay Gatsby's mansion: Fund managers in impeccably tailored suits exchanged pleasantries while meticulously coiffed waiters served gluten-free quinoa salad. As the conference started, feature presentations from Bill Ackman, Steve Eisman, Jim Chanos, and others were interspersed with videos from the Sohn Conference Foundation seeking funding for pediatric cancer research. There was even a short but entertaining magic show from Oz Pearlman.

As a professional investor, I was primarily interested in the investment presentations (although who can resist a good magic show), but I found the format problematic. When your talk is projected on a giant screen to an audience of a several thousand, spectacle trumps subtlety. This, I suppose, is a problem endemic to all investment conferences, so it might not be fair to blame the Sohn Foundation. In the end, it is up to us as investors to focus on the light and ignore the heat.

The most valuable presentation, in my opinion, was also the least loud and least well-covered by the press. Li Lu, one of the student leaders of the Tiananmen Square protest in China and now chairman of Himalaya Capital, spoke without the aid of slides about a large group of securities that is mispriced by a wide margin: South Korean preferred shares trade at a 25–88% discount to their common equity counterparts while offering substantially the same or better cash flows.

While Korean preferreds lack voting rights, they pay dividends equal to the common dividend plus a spread. They also receive preference in liquidation, so under any scenario, going concern or bankruptcy, they offer a superior cash flow stream. Korean preferreds were originally issued several decades ago when the government pressured chaebols to raise more equity and delever their capital structures. The chaebols wanted the extra equity capital, but they also wanted to retain control of their companies - hence the new non-voting shares.

Li pointed out that one of the reasons for the discount is that Korean preferreds are poorly understood and largely ignored by the sell side. Managements tend to exclude them from earnings-per-share (EPS) calculations in public filings and thus have little or no incentive to buy them back (and capture the discount) because it would not improve EPS. This situation is similar to the option compensation issue in the United States (before tech companies were forced to expense options granted to employees, they had little incentive to curb those grants because they did not affect net income). EPS calculation rules are changing since Korea adopted new accounting rules in 2011.

The new rules require that all outstanding shares, including preferreds, be counted in the EPS calculation. The large discount between common and preferred shares in Korea is a glaring market inefficiency and a black eye for the country's financial regulators, who are eager to show improvements in corporate governance - long an Achilles' heel of the Korean market. So, there is some pressure to rectify the mispricing.

I should note at this point that I am somewhat biased toward Li's investment idea because Korean preferred shares constituted a large part of the Asian equity portfolio I managed for a New York hedge fund in my prior job. That is, I had done the work before and was in a position to recognize the presentation's value. The reaction of the audience at large, however, was polite silence. One contemporaneous tweet read, "I have no idea what Li Lu is talking about." Indeed.

[hoveite] 28/5/2013 13:12

Here is an account of a presentation Li Lu gave recently pitching the idea that Korean preference shares are undervalued - i.e. the same investment rationale that this fund has.



It goes against the grain to buy anything at a premium to NAV, but I like Weiss and Korean preference shares seem like a potentially interesting asset class so I've bought some of these.

[davebowler] 24/5/2013 16:46

Thanks for trying.

[jaws6] 24/5/2013 15:41

dave
Soryy did not find link for that artical.

[davebowler] 24/5/2013 14:22

Worth re-stating;
Midas Investment Management research;
Weiss have a proven track record, with average annualised net returns of 16.5 per cent since inception in 1991. They specialise in deep value and invest globally in discounted assets, working to exit these assets at narrower discounts.

They believe one of the most attractive and mispriced investment opportunities in the world right now is the Korean Preference Share market. Preference shares in Korea are currently trading at an average 65 per cent discount to their ordinary counterpart, with the main difference being they are non-voting (voting - in any event offers little advantage in Korea).

The fund will have no performance fee and will offer a full exit at Formula Asset Value ("FAV") after 4 years and every 2 years thereafter. There will be a 40 per cent annual share buyback in place from the beginning to avoid a discount.

At Midas, we like Korea and analysts believe that they may be the next country to embark on a round of Quantitative Easing ("QE"). Market watchers will have seen the gains in the stock markets of countries undertaking QE plus Korea is one of the cheapest valuation developed markets. Midas called the Thailand and Indonesia's markets well and now we believe Korea is the market of opportunity in Asia.

The fund also has an implied forecast dividend yield of between 2 and 3 per cent.

[skyship] 24/5/2013 14:12

DB - thnx for the intro - being an ardent fan of WEISS I've bought a few and also added them to the Header charts on the SL thread.