Many small- and mid-cap stocks here are trading "way below their potential", and investors can get sexy returns by uncovering them, said Mr Terence Wong, chief executive of Azure Capital.
Mr Wong, a steadfast champion of Singapore-listed companies, told a gathering yesterday: "I would say 60 to 70 per cent of the market is made up of privatisation plays, turnaround plays and ignored, unloved stocks."
Azure's All-Star Fund looks at the Asean market but focuses on Singapore, where valuations are "very sweet".
Since its inception six months ago, the fund has hit its target of $100 million assets under management and deployed half that in the Singapore market, generating 11 per cent absolute returns.
Seventeen of Mr Wong's 18 portfolio stocks are in the black, and his largest positions are in Global Logistic Properties, Fu Yu Corp, Avi-Tech Electronics, and KSH Holdings.
The fund searches for special situations, like privatisations and turnarounds.
"I love turnaround situations," Mr Wong said. "When there's a turnaround story, the profits may be measly and the price-to-earnings ratio will seem astronomical. So when you do a screen on Bloomberg, you'll never discover these jewels - you've got to speak to the management.
"Every week, I try to meet up with eight to 10 companies, so I understand when there is a turnaround story."
Movie production house Spackman Entertainment Group is one company which Mr Wong expects will deliver its first quarter of profitability since listing.
Spackman generated 42 per cent returns for Azure over 31/2 months, second to Azure's top performer, Sunpower, which generated 50 per cent returns over a three-month period.
Mr Wong expects the market to enter a "healthy correction" this quarter, at which point he will be buying on dips.
"It's going to be healthy. You won't see companies diving 50 to 60 per cent except those that went crazy and ballistic and went up 10 times."
Mr Wong said he is already accumulating another 10 stocks, and eyeballing at least a dozen other companies.
The fund is open to accredited investors and has three anchors - Mr Eric Low and Mr Ching Chiat Kwong of Oxley Holdings, and Mr David Teo Kee Bock, Super Group managing director.