Talking Turkey With John Derrick

Upon his arrival in Istanbul, John Derrick prepared his notes for the next two days’ worth of meetings while he spent a cool, drizzly afternoon outside a café, sipping coffee and watching ships cruise by on the Bosphorus. Separating Asia from Europe, the Bosphorus has long served as an important trading lane. Today it’s the second-busiest strait in the world, traversed by an average of 48,000 vessels annually, or roughly 132 per day.

This is just one of many observations and insights that John, Director of Research at U.S. Global Investors, returned home with following his visit to Turkey and Greece, where he met with companies held in our Emerging Europe Fund (EUROX) and sniffed out other potential investment opportunities.

As this was U.S. Global’s first visit to Turkey since May, I made sure to follow up with John about what he heard and saw.

So what’s changed since our last trip to the country?
Well, one major change is that Turkey has become our largest exposure in EUROX since we exited Russia. There’s a reason why it’s is such an attractive place to invest in. It has a relatively stable economy, despite the European slowdown and recent threat of ISIS.

The International Monetary Fund (IMF) expects Turkey’s GDP growth to be about 3 percent this year, a little under what it was last year, but not by too much. Prime Minister Recep Tayyip Erdogan, who was elected in August, vows to make Turkey the world’s tenth-largest economy by 2023. This is probably a little too ambitious, but the country was able to grow its economy close to 230 percent between 2002 and 2013, so the goal might be achievable.

Like many other emerging markets, Turkish stocks had a rough September. Financials, which saw a nice rally this summer, took a tumble last month, but we’re starting to see some improvement. I had a very productive meeting with Garanti, Turkey’s second-largest bank and one of our top holdings in EUROX.

Our discussion touched on a number of issues such as the threat of NPLs (non-performing loans), central bank policy and what actions Garanti might need to take if the lira weakens any further. The currency’s been banged up recently because of the strong dollar, but now that the dollar’s going through a correction, the lira is trying to stabilize.

its composition. Also, make sure to look out for my chat with John about his visit to Greece.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Past performance does not guarantee future results.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.
The Borsa Istanbul Banks Index (XBANK) is a capitalization-weighted free float adjusted Industry Group Index composed of National Market listed companies in the banking industry. All members of the index are also constituents of the XUMAL Sector Index.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as 09/30/2014: Turkiye Garanti Bankasi A.S. 3.31%, Turkcell Iletisim Hizmetleri A.S. 2.40%, Haci Ömer Sabanci Holding A.S. 1.96%, Ülker Bisküvi Sanayi A.S. 1.02%, DO & CO Aktiengesellschaft 0.00%, Akçansa Çimento Sanayi ve Ticaret Anonim Sirketi 0.00%, Kordsa Global 0.00%, Türk Telekom 0.00%, Brisa Bridgestone 0.00%, Akbank 0.00%, Finansinvest 0.00%, Turkish Airlines (Türk Hava Yollari) 0.00%.       

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Written By: Frank Holmes