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CUNDILL INVESTMENT CONFERENCE
PETER CUNDILL, SETH KLARMAN ET AL.
(continued from preceding page)
In Thailand, there are a few things we've been doing, but I suspect it's still very early to be able to talk about anything specifically. And Malaysia and Indonesia were so overvalued that I don't know whether they're worth commenting on. There are a few net-nets in South Korea, but their huge, terrible debt-to-equity ratios are going to make it very hard. And although I don't know for sure, I suspect that when we go back and run our screen, we may find some things to do in Brazil since it's gone through a bad patch in such a short period of time.
So we believe there's lots to do outside of what you might call the Anglo-
American world and very little inside.
DEEP DISCOUNT TO FAIR VALUE AND BACK AGAIN.
You're going to way too much trouble, Peter....
Cundill: My visits to Japan date back to 1969 - although there was a hiatus between then and 1985 or thereabouts until I began going back regularly again.
But in 1985, we bought a company called
And he'd say, "Peter, I don't think you should worry so much about all of this value stuff...."
But if you want discounts, howsabout an 80%+ discount?
Cundill: "But," he said, "if you're going to worry about all of that stuff anyway, there's a company that you'd probably like called Tachihi Enterprise."
By way of background, Tachihi - formerly named Tachikawa Aircraft - made planes during the Second World War in which Kamikaze pilots went off to glory. After VJ-Day, U.S. occupation forces used its facility - which just happened to sit on 225 acres of green land 35 miles west of Tokyo - as a base. And as you may imagine, there isn't a whole lot of green land within 35 miles of Tokyo.
"So," he told me, "they're working on getting approvals to develop their land. And the company has no debt. So if you take the value of that land, Tachihi's real estate alone would make its shares worth ¥13,000 each."
Well, at that time, its shares were trading at ¥2,500. So, I said, "Gee! That sounds like the kind of thing we do. It's not a net-net. But it sounds like it's selling at a mighty big discount to realizable value." And so we bought it.
And trading with my characteristic shrewdness....
Cundill: Well, within six months, Tachihi's shares had risen all the way to ¥4,600. So I said, "Thank you, Colin." And I sell half of our shares because we're good and disciplined.... But along comes March 1987 and I sell the rest of our shares because at this stage, the valuations are getting to be wild.
Shrewd trader that I am, by 1990, Tachihi's shares are up to ¥12,800. But, of course, I know you wouldn't want me to make money on overvaluations like that....
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