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Hidden Champions Fund – Monthly Factsheet (end July 2017) and Imminent Soft-Close of Fund

Dear Clients and Partners,

Our Fund NAV is up 8.6% YTD as at end July with the valuation re-rating that comes from the continued growth in fundamentals of our core portfolio stocks, bringing our cumulative total absolute positive gains since inception in September 2015 to 26.1%. Please click to download our latest Hidden Champions Fund Factsheet as at end July 2017.

We are also grateful to our clients who have entrusted their hard-earned assets with us since our initial fund launch offering at end June and all our clients have made positive gains – our first client who invested $1 million is up over 7% – despite turbulent market conditions with mounting concerns over “fire and fury” geopolitical instability; the impending unwinding of the Fed’s balance sheet and the exit strategies of a number of central banks in their monetary endgame policy; the unexpected magnitude of the potential China bond default wave; weak economic growth; trade tensions; concentrated gains in selected technology mega-cap stocks, cyclicals and financials; and a host of other risks.

We are careening towards the end of the bull market. At the Hidden Champions Fund, we aim to protect and grow capital by positioning for and capitalizing on the upcoming downturn in the global/economic business cycle. How do we prepare for crisis? Time the market? Buy put options? Buy “safe haven” bonds? In Issue 2 of our Upward Toiling newsletter, we shared the insightful empirical research “The Best Strategies for the Worst Crises”. Evidence was reported that an investment strategy in quality stocks benefit from a “flight to quality” effect during crises: “While quality stocks logically deserve a higher price-to-book ratio, in reality they do not always exhibit such a premium. Towards the end of the bull market, quality stocks often looked underpriced. Then, when the market has a drawdown, these stocks have outperformed, benefiting from the so-called flight-to-quality effect.” Specifically, the quality factor delivered 43.7% returns when markets were down -45.3% in crisis periods. At the Hidden Champions Fund, we expect to outperform as the current market hype over the “flight to junk” carry trade that’s groping for yield subsides and the overall market retreats – our Fund tends to do better when the overall market is tepid and lacklustre. For instance, in 2016, when MSCI and Singapore STI index were flattish to down at +2.5% and -0.1% respectively, the Hidden Champions Fund is up 14.3%.

With the Value-to-Quality (VQ) ratio of our Hidden Champions Fund presently 179% superior than the market comparable, we believe the Fund is significantly undervalued to its intrinsic value and the downside risks are limited to protect investors. As the CIO & CEO of the Hidden Champions Fund, a significant part of my personal savings is invested in the Fund along the same terms and fees as the incoming external client.

During the investment process, many investors are led astray by shortcuts. It’s hard to see how it could be otherwise when the top business experts and thought leaders wily talk us with shortcuts, hacks and tricks that optimize for quick and obvious success. How to build something that last through time and crises is a lifelong fascination and a calling for us at the Hidden Champions Fund.

The Hidden Champions Fund is not for everyone. Only for investors who see themselves in the Hidden Champions – their struggles, how they are misunderstood and overcome the odds with persistence, and the non-linear triumphs – that we invest in with high-conviction when the reward-to-risk and value-to-quality metrics are compelling. Only for investors who want to go the right way, not the easy way.

Our Fund will be doing a soft close at the end of September. Investors who subscribe into the Fund before our soft close will qualify for a Founding Partnership Cash Bonus. After the soft close, we will be single-minded monomaniacs focusing on investing. We are planning a trip to Taiwan and India in late October/ early November to visit a list of Hidden Champions, including our portfolio stocks Nyquest Technology (GTSM: 6494) and Emmbi Industries (NSE: EMMBI) in which we have declared to the exchanges as a substantial shareholder with over 10% and 5% equity stake respectively. All our core stocks have achieved record results in their sales and profits and have guided resilient growth outlook which we will update next week in the upcoming Issue 3 Upward Toiling of our Hidden Champions.

We have also revamped our website which we are still refining, do give us your valuable comments: www.hiddenchampionsfund.com.

Warm regards,
KEE Koon Boon | Chief Investment Officer & CEO
Hidden Champions Fund

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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