These are my notes and instant reactions from a presentation at the Value Investing Congress, the notes below might contain errors, paraphrases, incorrect quotes, or misinterpretations.
Petra presented on South Korean stocks last year in Las Vegas as well, so it’s likely that these stocks are also ones that individual investors have trouble buying.
They’re going to suggest a position in Nexen Tire, note sure whether the common or preferred.
More on Korea — population is about California and NY combined … geographic size is about like Kentucky. It is one of the wealthiest dozen or so countries in the world, it’s not really an “emerging” market, it’s a long term powerhouse that may become the next Germany. It is overlooked because it’s between the two giants of Japan and China — people look to Japan for stability, China for growth.
They’ve gone through a rapid transformation from poverty to wealth in the last 50 years. Their credit rating is better than China or Japan, one of the most financially sound economies — and most of the companies have excess net cash positions.
How did they grow? Strong focus on education, 75% of young adults have College degrees, and it has one of the best infrastructures in the world, including the best high speed internet infrastructure in the world.
Korean companies have become global powers, including 14 on the Fortune 400 (LG, Hyundai, Posco, Samsung, all the biggest Shipbuilders)
Hidden champions in Korea include Neighbor (IM app called LINE, 300 million active users, similar to WhatsAPP but profitable), HJC Helmets, leading global brand, Amore Pacific cosmetic company does well all over Asia, SM Entertainment, their largest entertainment agency, and Orion confectionery. Several of these are brands that people think are Japanese but are actually Korean.
Korea largely exports partially finished goods to China, which are finished and then exported to the rest of the world.
Nexen Tire is a global tire manufacturer, about $1.6 billion in revenue and about $160 million in earnings. The stock has been weak over the past year, with stalled growth, but they think it has become cheap.
Currently the third largest tire manufacturer in Korea, has been one of the fastest growers in their niche. They started as a manufacturer of cheap tires for passenger cars — still low priced, which fuels ...