Feb 17, 2022 – Investor Letter

To the investors,

2021 ended to the delight of most investors in the Vietnam stock market. VN-Index rose 35.7% for the year. The market grew 208% in the last 10 years, for an average return of 10.8%/year.

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Established in the early 2000s and grew rather consistently, the stock market has gradually been proving its legitimacy in the eyes of Vietnamese investors. Looking at capital flow, 2021 marked a strong rise in local capital, even replacing the leading role of foreign investors in the past 2 decades.

For AP Alpha, 2021 was a good year with high returns. APF1 and APF2 grew 52% and 57%, outperforming the market by 17% and 21%, respectively. However, instead of looking at results in 1-2 years, we should be focusing on 5-10 years growth. In the past 5 years since establishment in February 2017, APF1 has a total return of 235%, equivalent to an average compounded return of 27.5%/year.

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By looking at a 5 year growth, we shall be able to avoid the mentality to bet on the market in the short term. Similar to the beginning of last year, investors now again questioned if the market had grown too much and whether it still has potential for further growth? Should we skip this year and wait for the next? From AP Alpha’s experience, predicting the market in 6-12 months is difficult. We have observed many investors cashing out at the end of 2020 and the start of 2021, hoping to take profits at high prices and wait for the market to become cheaper. These investors face 2 important risks:

Firstly, the companies they sold do not become cheaper but even more expensive. In reality, the stock price of many companies grew significantly in the past 12 months, a period long enough for many investors to become impatient and buy back at a higher price.

Secondly, even if prices fall, in many cases, the prices don’t fall back to a level these investors wanted. This waiting period is down to luck and could last for a long time. Jeremy Gratham, one of the most famous value investors, warned about a bubble since 2010 after the US stock market grew significantly in 2009. Since then, the S&P 500 still grew, on average, 13.6%/year in the next 10 years, much higher than the 140-year average of 9.2%/year.

In conclusion, getting in and out of the market would theoretically help investors to improve returns greatly and easily. But in reality, doing so often cause returns to be worse than staying in the market. The key is that we must have a long-term goal and identify a reasonable rate of return for ourselves. We do not need to outperform everyone, there will always be someone who performed better. We only need to reach our goal safely. This is the philosophy of AP Alpha.

For us, selling a stock would be based on the fundamentals of each company, not on overall market valuation. We would also sell based on the comparison to other investment opportunities that we may have. We will not sell top companies if they can still earn for us a long-term return of 15-16%, just because its stock price had doubled, to then switch to bank deposits with a 8% return of corporate bonds of worse companies with a 10-11% coupon. We will sell when holding the stock of companies, in the long term, cannot provide sufficient return to cover opportunity cost, or when there are better investment opportunities.

Thus, what will we be looking at for the period of 1 year? The criteria AP Alpha tries to pursue is to look at growth in cash flow that these companies are generating. By becoming more efficient, future cash flows of these companies will be higher, and along with it their valuations. We want to own companies where, in terms of valuation, will always be higher and not lower than the target we set.

Looking at 2022 and the following years, there will not be many easy opportunities when price levels are currently fair. We are monitoring good companies but the prices for them are not yet reasonable to start building a position. For our current positions, we are expecting a total return of about 80% in 5 years. With a little support from the market, we are likely to achieve and exceed the target of 100% return in 5 years.

2022 is expected to be the year of true economic recovery.  Compared to 2021, the business environment is much better as the pandemic is mostly under control due to high vaccination rates. The biggest obstacle for economies to return to growth is inflation. Looking at profit growth of large companies in Vietnam and globally in 2021, AP Alpha sees that even though Covid had caused troubles and losses for the Government and for the people, it also created great opportunities for many companies to become more profitable and prepare for the next stage of growth. Our job is to closely monitor this development and find ways to participate in the best businesses for the value of our assets to not be left behind.

Another big obstacle for us will be market sentiment and high volatility in the time ahead. If 2021 was the year with volatility in the direction of excitement, 2022 or 2023 could be the years of anxiety and panic. Taking advantage of these opportunities to improve long term returns will require courage on the part of the investors to overcome the fear of the herd. Greed and fear will always be the investors’ enemies. In 2021, we overcame the fear of missing out, and the greed when seeing other people make a lot of money despite risks. In 2022, with a long-term investment mindset and strong understanding of the investments we hold, I believe we will be able to overcome fear if it happens.


As of 10/02/2022, the value of APF1 and APF2 are 33,532 VND/unit and 31,716 VND/unit, a growth of 4.3% and 5.0% year to date, respectively.

Since establishment, the performance of the 2 portfolios are as follow: