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VALUEVEST MANAGEMENT'S
MARK BAKAR AND JOHN BURBANK
(continued from preceding
page)
THE MOST EXTREME UNDERVALUATIONS I'VE EVER SEEN."
Because Mark Bakar founded ValueVest Management only about 2-1/2 years ago, his track record is quite brief by OID standards. However, during that short period, he piqued our interest with some unusually intriguing ideas.
Therefore, with some of his favorite hunting grounds, which include the emerging markets, recently savaged, (a casualty of the turmoil in Asia) we thought that it might be a particularly interesting time to speak with him and see if he might be willing to share some of his ideas with you. Making us all the more interested, that savaging occurred following three years of anemic returns in emerging markets and with U.S. valuations near all-time highs.
The excerpts which follow were selected from a series of extended conversations with Bakar and one of his associates, John Burbank, beginning December 5th and continuing until very near press time. Again, we'd hoped their bag of bargains wouldn't be empty. Nevertheless, we weren't prepared for the quantity or quality of the ideas they shared with us from which the following were selected and their insights about some of the markets in which they're based. We hope you'll find their ideas as intriguing as we do.
WE'RE FINDING SOME UNBELIEVABLE BARGAINS.
OlD: With apologies in advance for sounding like the proverbial happy undertaker at some terrible tragedy, we understand that there's been absolute carnage in some of your favorite hunting grounds.
Mark Bakar: No apology necessary. We feel the same way. In fact, it's funny that you call now - because, frankly, until recently, we haven't seen very many of the kind of compelling bargains I know you fancy for some time. But now we feel like kids in a candy store. We're finding some of the most unbelievable bargains we've ever seen.
And that's due to a confluence of factors: Things started blowing up around the end of October. And a lot of mutual funds have an October year-end. So there was extreme selling pressure in these markets at that time. And there are still things being sold for reasons that have absolutely nothing to do with fundamentals - to fund redemptions, for tax reasons, etc.
OlD: And, no doubt, to eliminate painful reminders - to themselves and their clients.
Bakar: Absolutely. Also, many of the firms who began to invest internationally over the past three to five years have been the biggest mutual fund companies who traditionally had been domestic players. And they usually have a lot of capital to invest. So they're limited in what they can buy. And they typically buy the seven or eight largest stocks in each market.
And what happens is that as those markets rise - and these firms see stability, certainty and calm waters - they start venturing into smaller and smaller stocks and bid 'em up.
OlD: Good old rear-view-mirror investing.
Bakar: Exactly. And that's great - as long as the market is going up. But when it goes the other way and they want to sell those big stakes, they can't. In fact, there's a total vacuum. And, therefore, a lot of stocks
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