My 5 new Persian wives
Maybe it is the voyeur in you that made you click on such an ungallant title. But now that you are here, let me remind you that stock investments are subject to market risks. Please consult your finance, legal, and tax advisor before you venture into Turkey. Maybe even check with your bartender because you gotta be a little drunk to probably see any rationale on here. With that said, hop aboard your flying mat, and let me introduce you to the reasons not to marry any Turk, let alone 5.
Reason NOT buy 1: It has been generally accepted to stay away from regions with social and geo-political unrest. This is why it is accepted in the common wisdom of the hedge funds and Wall Street to exit out of (pseudo)dictatorships. But part ownership in equities around the globe is like musical chairs. Someone has to occupy the seats as soon as they empty. I got the seats cheap and I plan on sitting there for decades. My rationale — As a dictator, who is known to be good at the game, would you let businesses flourish OR not? We can see similar examples eastward but thus far I have been proven wrong in one major bet.
Reason NOT buy 2: Another perfectly valid reason to stay away from Turkey is hyperinflation. The only way to avoid the impact is if you own something that has its cost in the Lira and revenues in the dollars. In those rare cases, hyperinflation is an advantage for the business.
Reason NOT buy 3: And if that is not a good reason enough for you to stop reading, you would probably have to spend ~$200 to start and close a trade and 2% frictional cost will accompany any position, excluding taxes. So entering Turkey has to promise a minimum 5% returns over the index to make the bet worth your while.
Reason NOT buy 4: Indexing the SP500 is a no-brainer that all successful investors recommend but rarely follow. I follow them in the approach and have yet to emulate them on the success bit. However, indexing Sp500 now is likely to give you the least returns since the beginning of times and Turkey is a cheap alternative with younger demographics, relatively cheaper labour, and has an economically strategic geographic location with proximity to Africa, Europe, the Americas, and Asia.
Reason NOT buy 5: A lot of appreciation has already happened and maybe the runway is over for a year-long anomaly that occurred once in a decade.
Despite these reasons, I ventured into Turkey and while I watch the macro with the same intrigue I watch the palm reader that lives in my grandpa’s village, the basis of the below thesis is purely based on the neocortex, unless as Kahneman might put it, my System I is masquerading as System II.
You probably want to see the ladies if you have stuck around this far. Look, I know calling them wives is wrong on several levels, but I hope to be with them during good and bad times longer than a typical American marriage. Long-time readers know that as far as equities go, Asian relationships for me overseas have been a little bumpy although a Chinese blind date has turned out quite well.
The 1st bet — AGESA.IS (or AVISF): If I am Shah Jahan, my Turkish Mumtaj will be Agesa, not to be confused with Geisha (but the pronunciation rhymes) Short for AgeSA Hayat ve Emeklilik Anonim Şirketi. The millennials and Gen Z Turks will likely not have govt. sponsored insurance or pensions so the personal insurance and pension industry is just about to take off in the region. Avid followers of Buffett and Berkshire letters will know the great flywheel effect float generated by premiums. 80% of this company is also owned by two entities with complimenting expertise maintaining a symbiotic relationship and a balance of power and an international know-how from a leader in the insurance space. Only 20% of the company is up for grabs and I own a meaningful slice, a portion this high for an average retail investor won't be possible for a publicly traded company in the Americas.
The 2nd bet — ANHYT.IS (or AUHYF): If I am Krishna, of course, Rukmini is the love of my life, but the Radha everyone will talk about is the tongue tickler by the name Anadolu Hayat Emeklilik Anonim Şirketi. With very similar business dynamics as the first bet, this is Turkey’s first Insurance company owned by the Bank of Turkey (Türkiye İş Bankası). The largest bank owning this is helpful, it creates a monopolistic default choice for borrowers who are forced to buy insurance on their loans. Homeowners would know the pain of buying the insurance, they would also know that they probably forgot the terms the day they stepped in the house. Who wouldn’t want to be at the receiving end of the cheque? My guess is when a lakh Turks buy personal insurance, I should collect a premium of a couple as it stands today between these two holdings.
The 3rd bet — CCOLA.IS (or Coca-Cola Içecek Anonim Şirketi): I am not the only one dedicating long pieces of art to their beloved investments. Here is Buffett singing about his favorite stock. You can’t be around a value investor, without listening to the words “Buffet”, a long-time holder of Coca-Cola (KO), or “Monish”, the guy who first ventured into Turkey. Well, with CCOLA.IS you get the best of both the masterminds at an incredible value. If you want to unpack how Coke works Monish explains the history of Coke and unit economics here and Buffett speaks on why he would never sell the shares of the Coca-Cola company. CCOLA.IS is NOT the same as Coca-Cola Inc. and in my eyes, it makes it better. Without getting into the specifics beyond the cited sources, when a random sample of 500 people of the total combined population in Azerbaijan, Iraq, Kazakhstan, Kyrgyzstan, Pakistan, Syria, Tajikistan, Turkey, Turkmenistan, Jordan, and Uzbekistan open a bottle of Coke (or non-Coke other drinks bottled at this plant), your’s truly gets the revenue. Diabetes and single-use plastics aside, I sleep well.
The 4th bet— TAV Havalimanlari Holding A.S. (TAVHY): You may have observed A.S., stands for Anonim Şirketi, which is the Turkish for incorporated company. Anyways, for this one, let me start with a question, when you travel, how much thought do you put behind which airline you fly? Too much? Want your favorite miles? Too little? Like the cheapest or the one with the fewest wait times/transfers? Carbon impact towards human extinction? Common things to consider as a prudent consumer about to take off. How often do you find yourself in a position to pick an airport? Traditionally airlines have produced net negative returns for investors despite multiplying safety, comfort, and time savings for all consumers (except when some entitled souls complain about babies crying on board.) Airports are an exception though. Very rarely can a consumer pick the airport. These are monopolies hiding in plain sight. And very few of these are up for sale. One is in Mexico, the other one is this holding company that owns or operates several airports in erstwhile Persia. If you ever make it here, be sure to pay for parking or better still, buy a Coke! That diabetes is not going to appear out of nowhere NOR will the planet pollute itself NOR will the global temperatures rise without you scratching the itch of the wanderlust. Make one of these, your next exotic travel destination!
The 5th bet — RYSAS.IS (or RYSKS) Monish gets all the credit for this one. You can see him teach about this thesis in an actual lecture here. These folks own a 12m sq. ft warehouse area, with 99 of it leased, 10-year inflation indexed leases with tenants like Amazon, Mercedes, Dupont, and Ikea paying in dollars and euros. The father-son duo who runs the company also are great capital allocators who have also captured the largest freight train traffic in Turkey, the largest truck fleet at 2000 and counting, largest forklift inspection business. That is Reysas Tasimacilik ve Lojistik Ticaret A.S. for you!
In conclusion
The crass analogy of five wives needs to be addressed. A few points. One, it probably got you to read this article, not a bad thing. Two, I have over 20% of my net worth tied in Turkey so this is a significant commitment in capital. Third, I intend to be here for the long run whereas most people treat investing as modern-day dating. If you spend more time, get to know the stock, double down on the bad times, and hold on longer during the good times, stocks will look very similar to a long-term relationship. Lastly, indexing is like dating the entire town and committing to no one. Up until a few generations ago, folks would argue polygamy is a much better approach than that one. One might argue, it is just a matter of timescales…
Further reading
Some of you may be the curious types and would like to how these lovely ladies are doing two months since I started building the positions. Here is a glimpse.
Investing can be rewarding if you are willing to put in the work. Who knows, you may even make some money! But most folks are lazy and won’t spend time on basic 4th-grade math. Don’t believe me? What is the value of x? Too easy for you? Solve for y; y is the net worth of the author and this blog has everything you need for that puzzle. On a more practical note, If puzzles like these interest you, I will leave you with a clothing company (MAVI.IS), a fruit packaging company (FRIGO.IS), and an appliance company (ARCLK.IS) in Turkey. Let me know which one you like the most and why. In the meantime, I’ll quickly admire my damsels before I continue this addictive treasure hunt.
More from Urban Malgudi here. You may also like some of these popular posts related to investing:
Intelligent Investor — Summary
Investing in high-growth economies
Retail investors pre-purchase checklist
