Korean Preferreds: Emerging Value

Ori Eyal presented his in-depth investment thesis on Korean Preferreds at Asian Investing Summit 2014.

Korean Preferreds: Thesis: 60% price discount PLUS 2% dividend yield PLUS improving corporate governance PLUS bargain hunting foreign investors EQUALS a triple in 5 years. Execution: Invest in a basket of 20 carefully selected (invest only in good businesses that are profitable and pay dividends) Korean preferred shares which are materially equivalent to common shares, but trade at a 60% discount and offer 2%+ dividend yields. Risk of permanent capital loss is minimized since investing in a diversified basket of cheap, profitable, dividend paying stocks. Korean preferreds were originally issued several decades ago when the government pressured chaebols to raise more equity and delever their capital structures. The chaebols wanted the extra equity capital, but they also wanted to retain control of their companies — hence the new non-voting shares. Today, 100+ public companies in South Korea have listed common and preferreds. Most preferred shares in Korea currently trade at a 50-70% price discount to their respective common shares. Since they must pay a higher absolute dividend amount, dividend yields are much higher and usually range between 2-5%.

About the instructor:

Ori Eyal is Founder and Portfolio Manager of Emerging Value Capital Management, a long-short global value fund. The firm’s in-depth research explores the merits of each investment in the context of a global market. Ori worked at Deutsche Bank Asset Management, Deephaven Capital Management and Aquamarine Fund. He holds an MBA from the University of Chicago Booth School of Business and an MSc. in Computer Science from the Open University of Israel. Ori has experience investing in both developed and emerging markets. His interests include economics, strategy, logic games and puzzles, artificial intelligence, science, physics, astronomy, and futurology

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