This year, a number of high-profile hedge funds that follow the value discipline, have closed their doors. The latest is Three Bays Capital, which announced plans to close at the end of last month, following years of week performance. Started in 2013 by former Highfields Capital Management money manager Matthew Sidman, Three Bays Capital once managed as much as $1.6 billion but has been struggling to find any attractive investment opportunities in recent years.
According to Bloomberg, which has interviewed people with knowledge of the matter, the firm is down 4% for the year to the end of September and has been flat for the past three years.
Thanks to the providers of computer technology that has taken all of the effort out of finding value, and the relentless market rally that has taken place since the financial crisis, the number of value stocks has dwindled over the past decade. Or it has, at least, in Western markets.
ValueWalk's Raul Panganiban with Maurits Pot, Founder and CEO of Dawn Global. Before this he was Partner at Kingsway Capital, a frontier market specialist with over 2 billion AUM. In the interview, we discuss his approach to investing and why investors should look into frontier and emerging markets. Q2 2021 hedge fund letters, conferences and Read More
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Plethora of value in Asia
According to a new research report from CLSA analyst Damian Kestel, there is currently a “plethora” of Asia-Pacific larger-caps now offering varying margins of safety.
Kestel arrived at this conclusion after screening the market for stocks trading at, at least one standard deviation below their 10-year average P/E, PER and EV/Ebitda. What the analyst found is that vast swathes of the Asian equity markets are now trading at deeply discounted multiples.
A valuation of one standard deviation away from ten-year average Kestel argues offers a considerable margin of safety for investors. Approximately 51% of all Asia Pacific stocks with a market cap of more than $15 billion are trading at a price to book ratio one standard deviation below the 10-year average.
One stock the team at CLSA likes, in particular, is heavy equipment manufacturer Komatsu. This company has performed particularly poorly this year and is now trading one standard deviation below it’s 10 and 20-year historical price to book ratio. Concerns about the company’s ability to maintain its growth in a trade war are overblown according to the analysts. What’s more, the bulk of the company’s book value is made up of tangible assets, unlike peer Caterpillar. Komatsu is trading at just 16% of Caterpillar’s price to tangible book ratio.
This article first appeared on ValueWalk Premium