Frontier Investing – Asia and Latin America

by Dave

TWO OF AMIT WADHWANEY’S passions are international stocks and ethnic restaurants. That he is an avowed value investor is no surprise, given that Third Avenue Management, his employer, was founded in the mid-1980s by famed bargain-hunter Marty Whitman. Wadhwaney’s duties include running the Third Avenue International Fund (TAVIX). Barron’s recently caught up by Wadhwaney by phone.

Turning to Latin America, one country you’ve done a lot of work on is Colombia. What’s your view of that country?

Although investors in other parts in Latin America have started investing in Colombia, there is very a long way to go. On the plus side, there is a lot more de-risking that is taking place in Colombia on the ground level in terms of security, which is resulting in the opening up and starting up of new businesses. Consider, for example, the world of resources. Exploration in Colombia over the years for things like hydrocarbons, base metals, precious metals and coal was nonexistent. You didn’t dare do it because you wouldn’t come out of the bush alive. Now, on the other hand, there is a whole industry building—and not just because of the better security. It’s also because of the tremendous legal infrastructure that is in place to protect foreign investors—something lacking in many other countries in the region.

Anything else interesting in Latin America?

Previous episodes of rising inflation in Argentina have rarely had happy endings. But the ensuing macro-economic disruption, should it occur, holds the prospect of attractive investment opportunities.

Could you sum up one more holding?

This company is based in Chile. It’s called Antarchile [ANTAR.Chile]. Its market capitalization is about $8.7 billion, so it isn’t a little piker. The attraction here is the following: this company is effectively a vehicle of the Angelini Group, which also owns a little more than 60% of a company called Copec [COPEC.Chile], which is one of the largest-capitalization companies in Chile.

It is a very, very well financed company. Copec’s businesses include energy distribution, fisheries, pulp and gas stations across the country. They are also one of the largest plantation owners in Chile and, of course to the extent housing markets revive, they will benefit from that. The Copec valuation reflects all the current circumstances under which it is operating.

But you are getting Antar at less than the value of its holding in Copec, and you also get a 9.8% [stake] in Colbun, Chile’s largest hydroelectric-power plant.