Turning to the Value Partners Classic Fund, co-CIOs Cheah Cheng Hye and Louis So favour a nimble approach. Share noted that Cheah and So do not like speaking to investors, hence their management strategy is not always entirely clear.
Cheah and So also seek to identify undervalued stocks through fundamental research. They typically take contrarian positions in stocks trading at discounts to their intrinsic value.
Their large team of sector analysts gathers information by doing company visits and conducting in-depth research on each stock. Both quantitative (such as profitability and balance sheet) and qualitative factors (such as management quality, competitor analysis and shareholding structure) are examined in detail.
The team members share their findings at weekly meetings and the analysts each draft a possible portfolio construction within their respective sector. The best ideas are selected and implemented through the sector leaders across the relevant portfolios, although there is not much clarity as to how sector allocations are decided on.
Cheah and So also make calls related to physical gold, index shorts, tactical cash calls and leveraged positions. Share said that the Value Partners fund maintains up to 20% of holdings in cash.
Share noted that while the investment process has to date been well-executed and delivered acceptable results, this process is not infinitely scalable. “Several of the holdings look trendy, but they might not be in the best interests of their investors,” Share said.
Cheah and So have made sizable bets on China’s healthcare and energy sectors. The team particularly favors Luye Pharma for its dominance in oncology and cardiovascular drugs and intravenous solutions producer Lijun International Pharmaceutical. In the energy sector, PetroChina is the team’s favourite as China aims to diversify away from coal as its main energy source.
A snapshot of portfolio allocation:
| First State fund | Value Partners fund | |
| Launch | 1 December, 2003 | 1 April, 1993 |
| AUM | $563.7m | $1.95bn |
| Number of holdings | 47 | 80 |
| Top sectors |
Technology – 13.2% Real estate – 4.6% Healthcare – 4.0% Financial services – 6.9% Utilities – 6.87% |
Healthcare – 7.4% Technology – 6.4% Industrials – 5.4% Financial services – 4.0% Energy – 3.9%
|
| Top holdings |
Taiwan Semiconducter Manufacturing – 5.1% CK Hutchison – 4.6% Delta Electronics – 4.1% Tencent Holdings – 4.0% Tong Ren Tang Technologies – 4.0%
|
CSPC Pharmaceutical – 4.3% China Life Insurance – 4.0% PetroChina – 3.9% Zhuzhou CSR Times Electric – 3.9% Luye Pharma Group – 3.1% |
