Value Investing

TwinPeak’s 1H2016 NAV Results (Excerpt)

Below are excerpts from the quarterly report of a private family office we manage. Results are only audited on an annual basis.


December 31, 2015

To the Shareholders of TwinPeak:

TwinPeak NAV (the “TWIN”) increased 3.40% versus a 3.05% loss for the iShares Core MSCI Pacific ETF (the “MSCI Pacific”) for the 6-month period that ended December 31, 2015. The following table compares the TWIN’s unaudited performance (after fees) with that of the MSCI Pacific for various periods ending December 31, 2015.

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At December 31, 2015, the value of a SG$10,000.00 hypothetical investment in the company at its inception is worth SG$10,340 compared to SG$9,695 for the MSCI Pacific.

Market Commentary

As mentioned in the last quarterly update regarding the slowdown and instability in Emerging Markets, our stance remains the same. That is equities within the region are cheap.

Our core market – Singapore, have tumbled 15% this year, putting them in the same league as Greece. Shares on the MSCI Singapore Index trade at 1.1 times the value of companies’ net assets, compared with a multiple of 2 on a measure of global equities. The gap between the two widened this month to the most since May 2003. On the same note, Hong Kong is trading at valuations similar to that during the Asian Financial Crisis period. During that period, the lowest price-to-book ratio of the Hang Seng Index was around 1.0x. Today, the index trades at a 1.2x price-to-book ratio.

“Sentiment is extremely bearish, approaching levels seen in the depths of previous crises. Three decades of investment experience in Emerging Markets teaches that panic selling always creates opportunities.”

— Richard Titherington, JPMorgan AM CIO

Negative economic news continued to buffet investors around the world. Higher interest rates, brought about by the recent Fed rate hike, imply higher cost of capital for companies and investors alike. Oil prices fell to their lowest in a decade against a backdrop of a stuttering Chinese economy. The economies of Hong Kong and Singapore, as global entrepôts were not spared. Fear is on the rise and investors’ overreaction in stock markets contribute to the widening gap between reality and valuations. But, it is from these in which investment opportunities are born.

In this uncertain climate, diligence and conviction allow value investors to stand above the rest and capture the opportunities presented. We have utilised the cash to purchase new and accumulate existing undervalued equities within our four core markets. However, some cash are maintained in the event that markets do get cheaper.