Seafarer Capital Partners is an investment adviser focused on emerging markets. The firm was founded in 2011 by Andrew Foster, who previously worked at Matthews International Capital Management. They currently offer two funds: Overseas Growth and Income and Overseas Value.

Below are some highlights from Andrew Foster’s portfolio review for the third quarter. The complete letter is available here on their website.

New holdings: Coway Company, a South Korean manufacturer and distributor of home wellness appliances. The company sells its consumer products to individual households on a “lease to own” basis. The company’s product line includes air and water filters, bidets, mattresses and kitchen appliances. MBK Partners, a private equity firm and the company’s controlling shareholder, has overseen the company’s spin-off from its parent, reduced leverage and strengthened its sales networks, leaving the company well positioned for the future.

Here is an excerpt from their letter: “Coway’s leasing arrangements ensure relatively predictable cash flows, and the high-touch sales model helps generate slow but steady growth. Coway’s success hinges on whether it can develop new product categories, successfully enter new geographies, and fend off rising competition. If it does so, I think it can accelerate its earnings growth and dividends such that the yield could rise roughly 25% to 30% over the next three years, making it an attractive holding for the fund.”

Market updates: Discusses the recent rally in emerging market stocks. Feels that the expectations gap in these markets (the difference between forecast profit growth and actual results) has narrowed vs. the period from 2011 through 2015. The fund remains underweight Chinese stocks, in particular those of internet companies. His view is that they don’t generate enough current income to satisfy the fund’s investment criteria.