True confessions of a value-stock trader

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True confessions of a value-stock trader

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Lee Chai-won

Lee Chai-won, chief investment officer at Korea Investment Value Asset Management, is a man behind the company’s hugely successful equity fund that boasts 132 percent in accumulated yield since it was created April 18, 2006. The yield is much higher than Kospi’s growth rate (35 percent) in the same period. When the local bourse market was hit by a weakening Japanese yen and North Korea’s continued military threats, investors who bought the company’s equity fund enjoyed a 9.4 percent yield.

The popularity of Korea Investment Value Asset Management’s equity fund was proved again this year as it enjoyed about 650 billion won ($580 million) in net inflow, while a combined 1.89 trillion won was paid out from equity fund products. The company also created a buzz in the newly opened property accumulation fund market, where lots of asset management firms are competing, as it already accounts for 7 billion won of 14.7 billion won of products sold in the market.

But Lee said Korean fund managers find it increasingly difficult to find hidden gems in value stocks these days. “I have a hard time falling asleep, and my hands tremble because of stress,” Lee said in an interview with the JoongAng Ilbo on April 18.

Q. Your company had a marvelous performance. Why are you stressed?

A. We invest in value stocks. We buy undervalued company stocks at a cheap price and sell them at the right price. This means we will be able to sell many stocks only when their prices go up, which also indicates we have to pick lots of stocks for new investment. That’s why I get stressed out.

Which stocks are you paying special attention to these days?

테스트

Large-cap companies. Small and medium cap stocks have risen considerably.

As an investor who invested in value stock, it’s time to sell [the latter]. Considering the price book-value ratio, top 100 large cap companies’ stock prices have gained an average 65 percent higher compared to small and medium cap stocks since 1998. But this figure has dipped to 56 percent, which means there’s an opportunity for investing in large cap companies as value stocks.

Your direction seems to be clear, and yet you still suffer from immense stress?

It’s because of the fierce competition. After value stocks earned a reputation for steadiness, many fund managers are in search of them. Now everyone is buying value stocks, and this raises their prices. Value stocks have become rare. It’s difficult to find them. Let me put it this way. In the past, when I picked up 20 to 30 stones to find crawfish hiding there in river, I ended up finding two or three. Now you can barely manage to find one after checking 100 stones.

What’s your strategy to survive among stiff competition?

On-site company visits. To get investment information, I visited companies 1,500 times per year. In 2011 alone, I visited companies a record 1,628 times.

You make on-site company visits when you focus on small and medium cap companies? Aren’t such visits unnecessary for large-cap companies?

It’s necessary. It’s a must to see the company on-site and meet employees. I even visit rival companies. I might get information that a company invested in rival companies’ shares.

But your strategy can be adopted by other asset management firms as competition in search of value stocks intensified.

There’s another important strategy. Strictly stick to the investment principle for value stocks. The price of value stocks doesn’t surge immediately after purchase. When Kospi skyrocketed and rose 10 percent each month, yield for value stock-linked funds stayed flat. Some salespeople panic, and in most cases managers at other companies switch value stocks under the pressure. But we never do that.

What’s your driving force behind maintaining the principle?

I keep my faith under the support of CEO of the company. The long-term outcome depends on sticking to the principle. I believe Truston Asset Management earned its reputation among investors because its leadership thoroughly kept its investment principle.


By Kwon Hyuk-joo [mijukim@joongang.co.kr]
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