Value Investing

Ori Eyal August 2015 Letter To EVCM Investors

Ori Eyal‘s letter to Emerging Value Capital Management investors for the month ended August 31, 2015.

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EVCM is a focused global value fund. Our goal is to generate the highest possible long-term returns without risking a permanent loss of capital. Employing a disciplined value investing approach, we search the world for the best investment opportunities based on long term business fundamentals. We then construct a long-biased, concentrated portfolio consisting of 20-40 positions, mostly stocks, trading at deep discounts to their intrinsic business values.

Ori Eyal EVCM

Our in-depth research explores the merits of each potential investment in the context of a global market. Many of our investments benefit from multiple economic tail winds as they operate in emerging markets that are experiencing rapid economic growth and development. We use little or no leverage and demand a wide margin of safety for each investment.

Ori Eyal: EVCM fund performance

For the month of Aug 2015, EVCM fund declined an estimated -4.3% net to investors vs. -6.9% for the ACWI Index and -2.6% for the HFRI Equity Hedge Index. Main contributors include: Short USO and Short TNA. Main detractors include: Howard Hughes, Samsung, General Motors, Qualcomm, basket of US Financials and basket of Korean Preferred Stocks.

Stock markets declined sharply in August, driven by fear of a Chinese economic slowdown. While we have no direct investments in Chinese companies, some of our companies do sell in China. Like all countries, China will experience economic cycles. Longer term it will remain a growth market as its multi decade economic emergence continues.

Ori Eyal EVCM

We were not particularly worried about the mlitary tensions in Korea. Both countries have a strong incentive to defuse potential flash points and avoid another active war, which is what ultimately happened. Furthermore, North Korea ($7.5B annual defense budget) is no match for South Korea ($34B annual defense budget) and its allies.

We continue to find compelling investment opportunities in global stock markets. Having just completed a review of our portfolio, we are confident that we own a collection of high quality stocks all trading well below their intrinsic business values. Therefore, we expect our portfolio to perform well once global stock markets resume climbing.

Sincerely,

Ori Eyal

Managing Partner