Jason Stipp: One of the benefits, I would say, of your fund is that you are able to look beyond the U.S. and try to find opportunities elsewhere. And I do notice, among your top holdings are some Hong Kong-based companies. So tell me what you're seeing there, and sort of contrast the situation in Hong Kong to what you're seeing in the U.S. and why you see opportunity in some of those Hong Kong companies.
Michael Winer: Sure. What's interesting is our Hong Kong companies are incredibly well-financed. So, unlike the U.S. companies that have historically used leverage that appeared to be reasonable when property values came down, now their leverage all of a sudden seems to be choking the U.S. companies.
But the Hong Kong companies are extremely well financed. Some of them are actually net-cash companies. And the management teams in Hong Kong have, over the last year or two, dealt with an economic downturn which has now reversed itself completely, and now they're in a full-fledged boom and asset appreciation. But they've been dealing with economic issues but haven't been dealing with balance-sheet issues.Read Full Transcript
So it's very comforting to be able to invest in companies that don't have to worry about maturing debts, don't have to be concerned about balance sheets. They're concerned about their business and how they make their business grow. And now the companies that we're invested in in Hong Kong are taking advantage of the rising prices for mid-market and luxury residential units.
Prices are streaking again. Commercial properties, retail is booming again, especially in areas of high tourism in Hong Kong. And the office properties, the market rents have gone down. Now they're going back up. Investment banks are hiring.
There's this whole frenzy now in Hong Kong, and a lot of it is related to the growth in China and the fact that mainland Chinese are able to come to Hong Kong and buy properties in Hong Kong. So it's supporting the market. And yes, we're cautious that there could be a bubble forming, but there seems to be a lot of room to grow in Hong Kong. We're not even close to getting back to the 1997 peaks in property values.
Stipp: So you would say there's still some room to run there. So, as a value shop, I'm assuming that you bought these at depressed prices, when the economic situation was looking bad there. But you still see some more opportunity and growth for those companies.
Winer: Absolutely. We started buying stocks in Hong Kong companies back right at the end of the SARS epidemic in Hong Kong, when nobody wanted to be there, and there was extreme bargains. Now, I won't say there are extreme bargains in Hong Kong right now. The stocks that we own, they're up 60, 70, 80 percent year-to-date, but they were down big in 2008 as well. So some of them haven't even come back to where they were at their peak early in 2008.
Not only are they growing, but their net asset values are growing as well. So we expect that these companies that we're invested in should be able to increase their net asset value year-over-year, by at least 10 percent per annum, for the foreseeable future. And they're still trading at discounts to net asset value. And we don't have to worry about their balance sheets, either. So we're very, very comfortable that we're seeing long-term economic growth, growth in net asset value, and ultimately it'll lead to a strong growth in the stock price.