2026
January
In January, we launched the Terra Nova Hidden Gems Fund. We identified two thirds of the starting portfolio and continued to assess multiple opportunities across several markets.
This month, we began our fund's research travel by conducting an extensive due diligence trip across six Caribbean frontier markets – Antigua and Barbuda, St. Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis, the British Virgin Islands, and Puerto Rico – to study in depth the cruise port operations of a $500m portfolio holding. The company, headquartered in Istanbul, owns the world’s largest independent cruise port operator, as well as six other sizable businesses in Turkey (natural gas, real estate, asset management, brokerage, renewable energy, power), which we believe are not fully reflected in its current 6x LTM P/E multiple and represent a significant sum-of-the-parts discount.
During the trip, we met extensively with the company’s founder and CEO, attended the ribbon-cutting and toured a new home-porting terminal in Antigua, and observed construction of retail and leisure amenities in St. Lucia and pier remodeling works in Puerto Rico. We also gained insight into the company’s strategy to add shore excursions as an ancillary revenue stream, motivated by the fragmented and underinvested nature of the category; as part of our diligence, we rode the historic St. Kitts scenic railway, which the company is acquiring and repositioning.
Passenger arrivals continue to grow, and the holding's global “port-folio” of 35 cruise ports – including the world's top-10 cruise ports of Nassau and Barcelona – is well positioned to benefit from sustained post-pandemic cruise demand.
February
In February, we finished identifying bottom-up investment cases for the Terra Nova Hidden Gems Fund’s starting portfolio. The fund is now nearly fully invested with 29 stocks from 14 emerging markets.
This month, we conducted research trips to the UAE and South Africa to study operations of a $500m IT distributor which has direct presence on the ground in 34 emerging markets across Africa, Central Asia, Eastern Europe, and the Middle East. We toured two major regional distribution centers located in Dubai and Johannesburg, and met with the group CEO and deputy CEO as well as regional general managers. While the premises of the company in Dubai were easily found on an online map and proudly featured a large corporate logo visible from afar, the location in Johannesburg – a city marked by worsened crime – was quite the opposite: its obscure site with no visible company insignia was guarded by armed security personnel. Nonetheless, the group’s recent entry into southern Africa has proven highly successful: sales and number of clients have been growing rapidly, and the company is doubling distribution capacity in response.
Headquartered in Cyprus and listed in Poland, this unique “pan-EM” IT distributor trades at 10x LTM P/E, which we see as a cheap multiple in light of the current outsized customer demand for the servers, memory products and central processing units (CPUs) made by the top global brands – including the world’s largest chip maker – that the company supplies. This demand has already started showing in the company’s numbers: for the months of November, December and January it reported increases in sales of +29%, +36% and +78%, respectively.
March
Just as we got our portfolio fully invested by the end of February, the Iran war started.
The uncertainty about the future feels similar to that of exactly six years ago. Just as we had built our initial portfolio as a team by January 2020, the Covid pandemic hit – and we closed the first quarter of our track record at our previous fund with a -36% return (the largest drawdown of our 23-quarter tenure, and one of the only three negative quarters). Back then, after repositioning the portfolio, we managed to end the year with a +35% gross return while most EM funds closed the year in the negative. We accomplished this by deliberately, and promptly, exiting any companies whose earnings were negatively impacted, and replacing them with companies which were likely to report strong earnings regardless of whether the pandemic disappeared overnight or took years to resolve.
We are following the same playbook this time. We have reached out to nearly 500 companies in emerging markets to identify the ones that are not impacted by the war; some might even additionally benefit from it. We have sold the names which are likely to be negatively impacted by higher input costs or lower demand, and have already identified promising portfolio candidates that are well-positioned to deliver strong earnings growth regardless of the outcome and duration of the war. The average LTM P/E ratio of the portfolio is currently 8.5x, and a third of the companies have net cash on their balance sheets.
This month, we made a research trip to Thailand. The mood on the ground was mixed: on the one hand, local businesses were concerned about the effects of the Iran war; on the other hand, however, they were most optimistic about a new strong government being formed after many years of political drama in the country. We studied operations of a $150m leading local cinema operator whose CEO has recently bought a significant number of shares in his business on the back of strongly increasing viewer demand for locally made movies; we learned that the firm’s core customer base is Gen Z whose cinema attendance has been on the rise. We also met with the CFO of a $400m warehousing operator, which has always benefited from economic uncertainty as businesses increase their inventory levels. When we first met these two local champions in Bangkok in November 2019, they were great but expensive companies trading at 19x and 25x LTM P/E, respectively; now they are much cheaper at 8x and 11x LTM P/E, respectively.
April
In April, we made a research trip to Turkey. This time, instead of going to the business capital Istanbul we visited the city of Izmir, a regional commercial hub which is an uncommon home base for public companies – while more than half of all listed Turkish businesses are headquartered in Istanbul, fewer than 10% are from Izmir, making it an all the more intriguing destination to search for hidden gems.
We met with the CEO and had a comprehensive due diligence tour of two factories of a $150m specialized vehicle manufacturer, which makes industrial trucks such as fire trucks, garbage trucks, aircraft refueler trucks, and cement trucks, as well as defense trucks. Founded in 1985, it is now a second-generation family-owned enterprise run by two brothers acting as the CEO and CFO, with the founding father serving as the chairman; the family's sole focus is on this one business, without any other competing commercial priorities. The company makes over 1,500 vehicles per year and exports three quarters of its production – protecting itself against Turkish lira depreciation – having shipped trucks to over 50 countries since its first export to Japan in 1998.
Given the relative obscurity of its Izmir location – removed from the bustle of Istanbul capital markets – the firm is not widely followed by investors, and the CEO has not met any in a long time. As a result, the market is missing that the company's defense segment – which typically contributes around 40% of its total revenue but generates very high margins (25-40% net margins compared to around 10% for civilian trucks) – is well-positioned to achieve strong earnings growth in the next few years. Entering this year, for example, the company already had sizable contracts in hand to produce armored defense trucks for delivery in Kenya and Turkey, and the management is highly optimistic that going forward there will be multiple tenders to participate in thanks to the current operating environment: internationally, the geopolitical situation is forcing defense strengthening and modernization, while domestically in Turkey, the pre-2028 election spending cycle is about to kick in. Adding to the thesis of investor misunderstanding, Bloomberg currently does not list defense trucks among the company's products, despite naming 14 types of civilian trucks – we are working on getting this case of incomplete information fixed, because applying a seemingly cosmetic change to the company’s description by adding “defense” to it can help get it on other fund managers’ radars and lead to a multiple rerating: while most other global defense-related businesses trade at over 30x P/E, this firm's LTM P/E ratio is only 7x.
Enjoying delicious food aboard a Turkish Airlines flight back from Izmir brought warm memories of our late friend, Dr. Mark Mobius, who passed away earlier this month at the age of 89. Widely regarded as the godfather of the emerging markets asset class, the ultimate nomad, Mark was known for traveling the developing world non-stop for decades, looking for undiscovered investment opportunities. As a matter of fact, reading about his gem-seeking adventures in a newspaper as a teenager inspired one of us to pursue a career in emerging markets investing. A man of a myriad stories, he will be dearly missed by many whom he inspired and educated. One of Mark's favorite tales was how in the early 2000s he managed to convince the CEO of Turkish Airlines to hire a catering provider from Vienna to improve the carrier's in-flight food experience – and time after time we thank him for that.
May
In May, we conducted research trips to the Philippines, Singapore and Thailand to study operations of a $1.8b IT distributor which has direct presence across nine countries in the Asia-Pacific region. We toured three of its distribution centers – in Cebu, Singapore and Bangkok – and met with their managers; we also met with the group CFO at the regional Southeast Asia headquarters in Singapore. We learned that the company’s Cebu facility is strategically important as the only IT distribution center with a warehouse in its region of the Philippines, providing an advantage in underserved provincial markets where many competitors do not even have a sales office; we observed at the Singapore operation how enterprise products are tested before customer delivery; and we navigated the Bangkok’s fully integrated warehouse with tight controls, strong security, and GPS-enabled logistics which allow for fast product delivery.
All three locations we visited – and the group overall – are experiencing an exceptionally strong demand for AI-related enterprise, networking, infrastructure, and cybersecurity products and solutions, despite any current global or local geopolitical or economic challenges. As corporate customers compete for the constrained supply of servers, processors and memory modules amid the ongoing chip and memory shortages, the company is able to expand margins through price increases. Its scale, leading market position in the region, longstanding vendor relationships, technical capabilities, and logistics infrastructure allow it to work with the full spectrum of requirements from the world’s largest technology brands and secure sufficient supplies of technology products, while its local competitors that tend to be smaller or more specialized are unable to keep up. The business trades at 10x LTM P/E, indicating that the market continues to underappreciate its growth prospects and overlook its strong position in the regional technology supply chain.
This case is similar to the one we described in our February update – an IT distributor listed in Poland with direct presence in 34 emerging and frontier markets – and we are happy to report that the Polish firm’s stock has become the fund’s first doubler, having appreciated by 119% since our purchase in January.
By the end of the month, all fund holdings reported their Q1 results. Two thirds of the portfolio companies had year-on-year earnings growth rates of over 20% – with a half of those achieving earnings growth of over 100%. We believe earnings always drive longer-term stock price returns and are confident in the portfolio’s fundamental standing.
June
In June, we conducted a research trip to Brazil to study the operations of a $500m real estate developer – the leading residential homebuilder in the country's Northeast region commanding over 20% market share in the medium- and high-income segment. Over the course of three days, we toured alongside the CEO more than 30 projects, construction sites, sales centers, and land banks across Salvador, Fortaleza, and Recife; we also met with the business's founder and chairman as well as several other senior executives. The company's brand was difficult to miss: its logo appeared everywhere we went across the three cities.
This family-controlled business was started in 1983 by three engineer brothers. While several large developers from Brazil's wealthier Southeast region have attempted to expand into the Northeast over the years, most eventually retreated. Decades of relationships with landowners, municipalities, brokers, and customers have created a competitive advantage that would be difficult to replicate, and enabled the company to assemble a land bank exceeding $2bn.
We gained a better appreciation of the company’s growth opportunities. In recent years, it has been successfully implementing industrialized construction methods in the mid-income product offering, which reduced construction times, lowered labor requirements, and increased gross margin from 20-25% to 36-38%. The company is also expanding into Brazil’s government-supported affordable housing segment through a partnership with a leading national operator. Management estimates that only 19% of affordable housing demand in the Northeast is currently being met, compared to nearly 90% in São Paulo, creating a substantial runway for future business growth.
A particularly noteworthy asset is the company's flagship waterfront redevelopment project in Recife. With approximately $700m in projected sales value, it is one of the largest urban regeneration projects currently underway in Brazil that will ultimately comprise residential towers, retail spaces, parks, and public infrastructure across an entirely new district. The development’s dedicated sales center, located in the city's prime shopping mall nestled among the world's most prestigious luxury brands, features a Disneyland-inspired immersive 4D presentation of the future neighborhood, creating a sales gallery experience that exceeds anything we have encountered in Dubai.
Despite its dominant regional position, significant growth opportunities, strong profitability, and exceptional earnings growth track record since the IPO in 2020, the company currently trades at only 5x LTM P/E.