Two “timid” college friends hitting the jackpot with “Value” stocks
Reporter: Inkyong Kim | Date: Jul. 02, 2013
[Translation]
"Right psychological makeup is a key to success"
- Interview with co-CEOs Chaewon Ri and Namho Lee of V&S Investment Management -
An investment management company stands out and gains fame through word-of-mouth while the entire brokerage business is floundering with the stock market in the ongoing doldrums. It is V&S Investment Management whose cumulative investment yield has averaged 168% over the past seven years. As its success story spread like wildfire, a growing number of institutional investors are knocking on the investment manager’s door these days. We met the company’s two co-CEOs – Namho Lee and Chaewon Ri.
(Two shy college friends joined hands and focused on “Value” stocks)
Their friendship goes back to 1988 when they were college freshmen. “We became friends before long because we had a lot in common. Both of us were very cautious. Or, to put it another way, we were shy and timid.” They met at the Department of Business Administration of Seoul National University. Most of their friends wanted a position in big businesses but they were more interested in what was going on the financial market. Both of them got an MBA degree in the United States and worked for a foreign investment bank for a while.
In 2006 Namho Lee established V&S Investment Management and asked Chaewon Ri to join the company. “Shy and timid,” as they described themselves, the two focused on “Value” stocks instead of chasing a wild dream of hitting the jackpot.
They concentrated their time and energy on “S” that stands for “Special Situation,” or a big event such as merger and workout, and pulled off a great success. One of their successful moves includes Halla Visteon Climate Control (018880) (former Halla Climate Control) that was about to carry out an M&A at the time.
The most memorable case to both of them was Paradise (034230). They knew that the company remained undervalued right after the IPO and began to buy its stocks. Then multiple favorable factors like a merger and a rush of inbound Chinese tourists followed. The stock price shot up from KRW 3,000 to KRW 20,000 and the company grew into the second largest of the Kosdaq market in terms of market capitalization. V&S Investment Management still owns the stocks of Paradise.
Of course, they were not always successful. CEO Lee said that he once bought the stocks of Neowiz (042420) before he set up his own company. “I managed to make some profit but it would be better off to sell the stocks later. The most difficult part is to decide the timing of the purchase at the moment when the line between growth stock and value stock gets blurry.”
(Right psychological makeup and focus on cyclical stocks)
CEO Lee quotes Seth Klarman, the renowned value investor, saying: “The analysis is the easy part of investing; it gets hard when psychology comes in.” Indices, charts and graphs are important but what is required most is the right psychological makeup because investment is an exercise of following and/or fighting human nature. If you take a long-term perspective and are willing to go through volatile market conditions, you can perform better than institutional investors under constant pressure to make profits.
CEO Lee points out that the recent market volatility stems from fears. “Needless to say, you should be cautious in the short term. But I am optimistic in the long run.” He predicts that the stock market will soon ride an upward curve, adding that it is time to pay attention to “Value” stocks in automobile part, chemistry and finance, whose price tends to rise with the booming business cycle.
*Link to original article*
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