5 min read | The valuation case for international equities is among the most compelling we have seen in years, but this is only part of the story. The conventional wisdom is that non-US equities are cheap for good reason and that international stocks are either low-growth or high-risk, but fundamentals are stronger than many investors perceive. In this paper, we discuss the underappreciated case for investing in international markets, built upon several timely and compelling themes.
7 min read | by Robert Silgardo | Earlier this year, I spent a week in Taiwan and met with over 20 companies within the Asian technology supply chain [click here to read more]. Economic activity, day-to-day life, and sentiment among citizens and corporate executives are largely back to normal. Most COVID restrictions and policies have been lifted, but many locals (especially those in the service industry) still wear masks, and everyone is required to mask up on public transit (including the high-speed rail). Concerns about a potential Chinese invasion, slower-than-expected demand recovery, and ongoing talent shortages were topics of discussion during many meetings with company executives.
4 min read | An excellent article in the FT by Richard Bernstein offers great perspective and makes a case for the overdue broadening out of markets [click to read]. We concur and have written extensively on this issue from a different angle. Our CIO John Hock worked with Rich back in his Merrill Lynch days and always admired his character, intelligence, investment acumen, and common sense. Different perspectives, but shared conviction in how this plays out.
11 min view | This video features a conversation between Sara Sikes (Head of Client Experience) and Alice Popescu (Portfolio Manager on our Emerging Markets Opportunities strategy, which is approaching its three-year track record). The discussion succinctly covers Alice’s philosophy regarding EM investing, her personal and professional journey, opportunities and risks we see in the EM landscape, and insights from recent research trips abroad. Click 'Read more' below to access the video.
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).