HVS 3Q22: Talas Turkey Value Fund Finds Turkey Attractive

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HVS 3Q22: Talas Turkey Value Fund Finds Turkey Attractive
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Hidden Value Stocks issue for the third quarter ended September 30, 2022, featuring an interview with Mesut Ellialtioglu, Turkey Investment Officer of the Talas Turkey Value Fund, discussing why Turkey is an attractive market.

See Part 1 here.

Mesut Ellialtioglu, Turkey Investment Officer Of The Talas Turkey Value Fund

Could you give our readers a bit of background on Talas Turkey Value Fund?

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My partner Mr. Matthew Peterson and I established Talas Capital, LLC jointly in 2016. Talas Capital is based in Austin, TX. Talas Capital launched Talas Turkey Value Fund, LP and the Fund commenced investing in Turkey and EMEA area focused companies on June 1st, 2017.

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Q2 2022 hedge fund letters, conferences and more

 

Talas invests with a long-term approach and views each holding as an ownership stake in an exceptional business. There is no management fee in order for maximum alignment of interest with our LPs.

Talas Turkey Value Fund, LP has completed four divestitures from its investment portfolio since June 2017. Net returns from these divestitures were in the range of 65% to 380%. In the first half of 2022, we did not record any transaction of sales from our portfolio investments. In 2021, we had two divestiture transactions in the portfolio.

And our portfolio turnover represented less than 10% of our assets under management during that year. This corresponds to an average minimum holding period of 10 years for our portfolio’s investments. Our fund has a concentrated portfolio with holdings focused on our best ideas with asymmetric expectations for future performance.

Talas Value Fund’s objective is to compound Partners’ capital at a high rate over the long-term, while minimizing the risk of permanent capital loss.

It is important to note that the high level of returns from the aforementioned portfolio investments were achieved during the period from 2017 to 2022, when Turkish equities and the MSCI Turkey Gross (USD) index lost more than 50% of their value.

During this period, Talas Turkey Value Fund experienced a positive return of 8.4% despite being fully invested for the long term.

At Talas, we target the value of our current investments to increase three times over in the next five years. We believe that the current 2-3 P/E valuation level of our investments offers a much more substantial return in the next 10-20 years, given their generation of above 30% annual return on equity.

Can you provide a bit more color on why you believe Turkey is such an attractive market?

Turkey is the 18th largest economy in the world. It is a G-20 country. The population of the country is 85 million, and it is relatively young.

Nearly half of the population is under the age of 30. There is huge domestic demand due to rapid urbanization, industrialization, and demographic factors. Also, Turkey is considered as “Small China in Europe” due to its very competitive, highly diversified manufacturing economy. Turkey is in a customs union with the EU. This means that the Turkish economy is highly linked with the EU and Turkish companies compete with their most efficiently run European peers.

Turkish companies not only survive but increase their market share in the EU year after year in an operating environment of a high level of global competition.

Also, underpenetrated economies in the surrounding geography, including the Middle East, Gulf, Africa, and Central Asia offer very lucrative growth opportunities.

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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