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VALUEVEST MANAGEMENT'S
MARK BAKAR AND JOHN BURBANK
(continued from preceding
page)
around the world are down 60-80% in U.S. dollars - irrespective of quality or fundamentals.
So there's hysteria. There's blood in the streets. And there's a liquidation underway in more than a few places around the world. Therefore, today, we're truly finding the most extreme undervaluations - the best values - that we've ever seen.
In fact, it's the first time in the 2-1/2 years of our firm's existence that I've ever called any of our clients and said, "Give me more money right now." And guess what? They're all giving me more money.
Not all our competitors have that luxury. Therefore, many are selling exactly when they should be buying.
OlD: So even if human nature has been repealed in the U.S., it still applies some places.
Bakar: Exactly. But, fortunately, our clients are very sophisticated. And they have very long-term time horizons. So we've had no redemptions. And we have no leverage. We've even got cash.
And I've never seen either the value or the hysteria that I've seen the last few months. But we love hysteria - because thanks to that hysteria, we're finding some amazing bargains.
OlD: You certainly know how to get our attention. But in the words of one of our favorite contributors, do any of these amazing bargains have names?
Bakar: They do. But, if you don't mind, let me bring John Burbank into our conversation before I start trying to provide you with too much detail - because, frankly, he and Oliver Ehrenberg are the brains of our operation.
By the way, aside from Oliver, who's based in London, we're all here in San Francisco. We opened a London office because we believe that you have to be on the ground to do the kind of things we do - because, of course, we're not exactly buying the Nestles and Sonys of the world.
OlD: What do you buy?
Bakar: We believe that we combine different elements from several of your contributors. Like John Templeton, we choose to have a global focus because of the generally much greater market inefficiency outside the U.S.
OID: As Templeton and his successors say: you'll thereby find "more bargains and better bargains"...
Bakar: Exactly. And, like Templeton, we're willing to invest in smaller, more obscure companies located in a wide range of countries. We also subscribe to his theory of seeking to invest at the point of maximum pessimism.
But, like Michael Price, we buy securities which aren't always all that straightforward such as convertible debt, arbitrage-type things and the like. Also similar to Price, we're willing to be more than a passive shareholder when the circumstances call for it.
OlD: In other words, you're willing to shake the tree.
Bakar: That's right. But, lastly, we also look for easy-to-understand businesses that are growing profitably and earning high returns that don't need much incremental capital to grow. We want them to be operated by capable, honest managers who have equity stakes in those businesses and who are accessible to us. And,
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