GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Turkish Investment Fund: 30% Discount to NAV

August 15, 2013 | About:
Turkish Investment Fund Inc.

NAV: $21.38

Net Assets: $130.13 Million

Market Cap: $94 Million

Share Price: $15.50

Fund Dividend Yield 2.7%

37.9% Discount to NAV

Turkey TMC/GDP = 25%

1737818619.jpg959368987.jpg

GDP per capita has been steadily trending up over the last 10 years and has almost quadrupled from the 1961 low of $1,556.00. The total population is 74 million with a total GDP of 789.3 billion

There was an outperformance by TKF in the first half of the year against the benchmark peer Morgan Stanley Capital International Turkey Index (MSCI) until the month of June where the divergence became more obvious.

1376533299174.png

In the letter to the stockholders Arthur Lev, president and principal executive officer provided some valuable insight:[/i]
[i]Turkey has a strong entrepreneurial culture which has begun to think longer term given lower inflation and new regional opportunities. This is reflected in the stock market, with an interesting layer of companies in the mid- to small-cap range, which have been increasingly represented in the portfolio. Having said that, we believe Turkey is potentially entering a period of rising political risk. Over the past decade, the market has become increasingly comfortable with AKP stewardship of the economy and the current political modus operandi, which have been recognized in the sovereign debt upgrades by Fitch and Moody's. This situation may change over the coming 12 to 18 months, with several elections, potential Constitutional reform, and the high probability that Recep Tayyip Erdogan will step down as prime minister when his third term expires. Further, the regional situation remains volatile with the growing conflict in Syria, ethnic struggles in Iraq, and elections in Iran. On a more constructive note, current events in the country and region could usher in a period of peace with the Kurds, as well as a potential solution to the recalcitrant issue of Cyprus. On balance, we believe political risk is rising for Turkey and hence a potentially rising risk premium in the Turkish market could be expected.
Current members of the team jointly and primarily responsible for the day-to-day management of the fund's portfolio are Eric Carlson and Paul C. Psaila, each a managing director of the adviser.

Two investment funds had piqued my interest when going through SEC filings regarding Turkish Investment Fund Inc. One was Lazard Asset Management with a 5% stake and the other the City of London Investment Group PLC with 3.7% of the fund.

On a promising note, Turkish inflation may finally be under control as shown in the last decade of under 20% CPI as well as government fiscal policy, specifically debt to GDP at a modest ratio under 50%.

1448842788.jpg1591895502.jpg

About the author:

Tannor Pilatzke
I am a self taught investor through Warren Buffett, Charlie Munger, Ben Graham, Peter Lynch, Joel Greenblatt, David Einhorn, Seth Klarman, Howard Marks, Phillip Fisher and Thornton O'Glove. My focus is a bottoms up Value-GARP strategy with a mix of top down contrarianism.

"When you find yourself on the side of the majority, it is time to pause and reflect." - Mark Twain

Visit Tannor Pilatzke's Website


Rating: 2.7/5 (7 votes)

Comments

coybarnes
Coybarnes premium member - 1 year ago
I'm curious where you got the TKF NAV information? Both Bloomberg and Morningstar list the NAV as $17.63. That's obviously a huge difference as compared to $21.38. Thanks.

Tannor
Tannor premium member - 1 year ago
That may be correct as the SEC filing was from period ended April 30th and 99% of holdings are common stocks. Thanks for the correction, the main point of the article is identifying the arb opportunity that is here. Common shares may be sold short against the ETF long providing a spread of NAV discount.

Here is the SEC LINK to semi annual shareholder report.

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK