3 min read | by Glenn Cunningham | I recently traveled to Spartanburg, SC, one of the primary automotive manufacturing hubs in the United States, with over 500 auto-related companies employing more than 75,000 workers. Meetings with manufacturers, suppliers, and government officials provided insights into key themes shaping the auto industry: technological change, new sources of competition, and supply chain disruptions.
9 min read | The Altrinsic Emerging Markets Opportunities portfolio gained 3.6% (3.3% net) this quarter, outperforming the MSCI Emerging Markets Index's 0.9% return, as measured in US dollars. Performance throughout the period varied markedly across emerging markets, with a particularly stark divergence between Asia and Latin America. China’s post-pandemic recovery has been challenging despite the initial reopening excitement, with underwhelming economic indicators driving significant underperformance. Meanwhile, economic activity in Latin America proved far better than expected, with many upward revisions and strong performing currencies in key markets, including Brazil and Mexico.
7 min read | International markets experienced more modest and broad based returns than global indices, where a narrow subset of highly priced US growth stocks (or anything related to AI) skewed benchmark performance. Europe remained pressured by an uncertain economic recovery and war in the east, while Japan performed well in local currency terms, offset by yen weakness. A sluggish recovery in China weighed on emerging markets. What really captured the headlines were “all things AI.” AI is a significant technological innovation, but we believe it is being greatly overhyped and overestimated in the short term, as is typically the case with new technologies. Stock prices for leading “AI stories,” primarily in the US, discount growth rates that will be difficult to achieve, thus impairing their underlying margins of safety. We see greater opportunity among companies throughout the world that are embracing AI in their operations to enhance their business quality and efficiency, most notably in health care, non-life insurance, exchanges, global consumer franchises, industrials, and business services, to name a few.
8 min read | Narrow market leadership by highly priced US growth stocks has been a thorn in our side, and we have written extensively about the combination of factors that would cause markets to broaden out. Despite the most significant of these conditions being well underway (rising rates and inflation uncertainty), the lack of breadth in markets has returned to historically extreme levels, with enthusiasm surrounding generative AI contributing to the surge. AI is a significant technological innovation, but we believe it is being greatly overhyped and overestimated in the short term, as is typically the case with new technologies. Stock prices for leading “AI stories” discount growth rates that will be difficult to achieve, thus impairing their underlying margins of safety. Although there are pockets of excess and exuberance, 68% of global stocks underperformed the MSCI World Index in the second quarter – and 44% actually declined – leaving many companies offering very compelling risk/return propositions. We see opportunity among companies embracing AI in their operations to enhance their business quality and efficiency, most notably in health care, non-life insurance, exchanges, global consumer franchises, industrials, and business services, to name a few.
Alice Popescu, Portfolio Manager, participated in the Pension & Investments webinar entitled “Emerging Markets: A Resilient Outlook.” Topics covered include why EM allocations belong in institutional portfolios, the regions/countries representing the best investment opportunities in EM today, perspectives on China, the benefits of active management, and key considerations for investors considering EM. Click 'Read more' below to access the recording of the webinar. A copy of the P&I EM supplement is also available for download.
5 min read | by Alice Popescu | Earlier this year, I spent two weeks on the ground in India meeting with over 40 corporate and political contacts. The major themes that emerged from the discussions were related to Semi Urban Rural (SURU) developments, the rise of domestic manufacturing clusters, and an underappreciated energy transition. The trip reinforced our belief that India offers an abundance of attractive, long-term investment opportunities among undervalued and often overlooked companies – perhaps surprising to some given its position as the world’s largest democracy (and most populated country).
8 min read | by Rich McCormick and Elijah Crago | Investor pessimism on the ground in Brazil has reached an extreme relative to the past decade – but where negative sentiment exists, there may also be value. The return to power of a leftist president, anti-business rhetoric, and interest rates back at decade highs have turned many investors away altogether – resulting in some of the lowest valuations in the world. Upon returning from a recent two-week trip to Brazil, we are excited by the investment opportunities emerging in the country.
9 min read | The Altrinsic Emerging Markets Opportunities portfolio gained 5.6% (5.4% net) this quarter, outperforming the MSCI Emerging Markets Index's 4.0% return, as measured in US dollars. Performance throughout the period varied markedly within emerging markets. The year began with strength in North Asian (China, Taiwan, and Korea) large caps on momentum from China’s reopening. The robust start tailed off as corporate scandals and political headlines drove underperformance in the large markets of India and Brazil. Additionally, turmoil in the global banking sector following the collapse of Silicon Valley Bank (SVB) made its mark on EM equities, though in a more subdued manner.
10 min read | Global equities delivered strong gains during the first quarter as investors shrugged off two of the three largest bank failures in US history and the collapse of once venerable Credit Suisse. The proximate cause for the rally is a belief that inflation risk is vanquished, interest rates have peaked, years of extraordinary financial stimulus can be normalized painlessly, and the global economy will not experience a downturn. This implies a tremendous amount of confidence in policymakers.
10 min read | Equities delivered strong gains during the first quarter as investors shrugged off two of the three largest bank failures in US history and the collapse of once venerable Credit Suisse. The proximate cause for the rally is a belief that inflation risk is vanquished, interest rates have peaked, years of extraordinary financial stimulus can be normalized painlessly, and the global economy will not experience a downturn. This implies a tremendous amount of confidence in policymakers.
