My Yahoo!Ward is also bullish on Siam Panich Leasing, Thailand's largest car-leasing company. The once-crowded leasing field has seen 80% of companies go out of business, leaving Siam Panich able to improve its margins with little competition.
Among the criteria for shorting: companies whose earnings have deteriorated or whose cost of capital exceeds its return on investments.
According to these criteria, Vtech, an electronics maker in Hong Kong (FORBES GLOBAL, May 28), and Chartered Semiconductor, a leading semiconductor maker in Singapore, are on the endangered list (see table).
With only $21 million in assets under management, Ward Ferry's fund is a shrimp, but that's an important part of the plan. In order to keep the fund nimble, they want to limit assets to $200 million. So that they can stay on top of each investment, they vow to have no more than a total of 40 long and short positions.
| HEDGING, WF STYLE |  |
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| Here are three long and two short picks from Ward Ferry Management |
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| Company/ | Investment thesis | |
| country | ||
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| LONGS | ||
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| PETROCHINA China |
Stock sells at P/E of seven, just above book value with a 9% dividend yield. Company to cut over 10% of work force in two years. | |
| SIAM PANICH LEASING Thailand |
Country's largest car leasing company sells at a discount to book value and will have a 15% dividend yield in 2002. | |
| TAKEFUJI Japan |
Leading consumer finance company has 18% ROE, a P/E of 12 and sells at twice book value. | |
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| SHORTS | ||
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| VTECH Hong Kong |
Electronics maker over-expanded and will report first loss in over five years. Profit recovery uncertain. | |
| CHARTERED SEMI- CONDUCTOR Singapore |
Stock fell 78% last year; gross margins under pressure. Stock has more to fall since it still trades at 30 times earnings. | |
| Source: Ward Ferry Management. | ||
Taking a big-picture view, Ward and Ferry argue that now is a good time to invest in Asia rather than betting on a rebound in the U.S. market. "In Asia, we see many stocks that are cheap, and they are improving their businesses. In the U.S., there isn't much more fat to be cut out of companies," says Ward. "Asian stocks now trade at a 40% discount of price to book value over U.S. stocks."
Time will tell, but we're betting that WF Asia's shareholders will be pretty happy five years hence. With a minimum investment of $50,000, Ward Ferry is a rare example of an affordable hedge fund that's still open to new money. Take a look now before word gets around.
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