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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Vietnam Attracting Investment Attention 3 comments
    Jan 12, 2013 8:44 AM | about stocks: VCVOF

    Barrons:

    There definitely are more familiar, less risky places than Vietnam in which to put your hard-earned savings to work. But a number of respected emerging-market fund managers say the Southeast Asian maritime nation's prospects are compelling enough for them to buy Vietnamese stocks.

    It's not hard to see why. The dynamic, resource-rich country is the world's second-largest exporter of coffee, after Brazil, and of rice, after Thailand, and it's a net crude-oil exporter, too. Taking a page from China's consumer playbook, its middle class is rising rapidly from a young and well-educated population of 88 million. But they're willing to work for lower wages than the Chinese, so manufacturing accounts for about half of an economy that's growing 6% a year.

    Vietnamese stocks also are cheap, underscoring the country's many attractions. Fast-growing food, pharmaceutical, and rubber-plantation companies trade at five to seven times earnings, which makes them 30% to 50% cheaper than their peers in other developing countries, estimates Mark Mobius, executive chairman of Templeton Emerging Markets. They also offer 4% to 6% dividend yields. "The key word for Vietnam at this stage of the game would be valuation," says Mobius. "Generally speaking, it's quite attractive."

    I am definitely pretty high on Vietnam. It has quite a few tailwinds and has learned some lessons from a few years ago especially on inflation. With the economy bouncing back and the market beginning to attract foreign money again I still see the play as Vietnam Opportunity Fund which still trades at a significant discount to net asset value. The management of the fund is shareholder friendly and is buying back shares to lower the discount. It is refreshing to see that we were positioned in Vietnam well before the mainstream figured out it was cheap and attractive. I am up almost 20% in this one and would buy it here if I did not have a position.

    Disclosure: I am long OTCPK:VCVOF.

    Stocks: VCVOF
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Comments (3)
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  • MarginOfSaftety
    , contributor
    Comments (9) | Send Message
     
    John,

     

    I know you like the Vietnam Opportunity Fund for its discount to NAV. This being said, the track record of NAV building 2006-2012 is very modest as listed in http://bit.ly/SqDos5

     

    Would like to hear your comments on their NAV (lack of) growth. Thanks
    12 Jan 2013, 09:34 AM Reply Like
  • John Polomny
    , contributor
    Comments (497) | Send Message
     
    Author’s reply » This is a legitimate concern. As with many emerging markets and frontier markets Vietnam was severely damaged economically during the 2008 financial crisis. These countries have weak banking systems and are very reliant on exports. So when the world wide crisis hit they got slammed very hard and it has taken longer to get stabilized. However, the future is in Asia and Vietnam is one of the diamonds in the rough. My view is that the country is now doing the right things i.e. getting inflation under control and de-regulating the economy. This will lead to economic growth and translate into higher per capita GDP growth over the long term. The divergence of the NAV from the market price is pretty extreme right now so if I want exposure to Vietnam, which I do, I think that buying assets at a discount is the way to go. It is also my view that money is beginning to flow back into these emerging markets and we will see NAV growth because of this. It is important to remember that an asset class or particular market can fall out of favor and move from overvaluation to undervaluation and stay there for some period of time. I believe that was the case with Vietnam and now it is coming back into favor and is seeing inflows of capital. The management of VOF understand this and has been buying back shares as that is the best use of capital right now.
    12 Jan 2013, 12:07 PM Reply Like
  • MarginOfSaftety
    , contributor
    Comments (9) | Send Message
     
    Thanks for your detailed answer John.
    13 Jan 2013, 06:37 PM Reply Like
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