3 Top Managers Give 3 Best Global Stock Strategies

Three leading portfolio managers at Envestnet’s Advisor Summit shared their strategies for developed, emerging and frontier market investing

In today’s large and globalized world, investment possibilities are already plentiful, and the choices continue to increase against the backdrop of shifting macroeconomic trends.

At Envestnet’s 2014 Advisor Summit in Chicago, three leading portfolio managers offered their perspectives on the international equity markets, where the best opportunities lie and why.

Michael Bennett, Managing Director, Lazard Asset Management

Stocks that have a good trade-off between value and financial productivity are the best bet.

Whatever happens at the macro level, both globally and within individual countries, is important to Michael Bennett, managing director and portfolio manager at Lazard Asset Management, but as a relative value investor “looking for stocks that have a good trade-off between value and financial productivity,” his primary focus is looking for names that will do well regardless of what’s happening around them at a regional or global level.

In 2011, for example, Europe’s woes dominated the news and “we were not bullish on Europe,” Bennett says. However, he did zero in on a few European stocks that, despite suffering from the overall downturn in Europe, were well positioned because much of their revenue came from outside Europe.

Today, valuations are much higher in Europe, and Bennett has been reducing his European positions. However, he continues to apply the same approach when looking at opportunities in other parts of the world, including the emerging markets, where he believes there are great opportunities.

“You read a lot about China slowing down, but I just read a stat that BMW increased its sales in China by 25%,” he says.

Kenneth Lowe, Portfolio Manager, Matthews International Capital Management

Asia’s long-term growth prospects will continue to support innovation and entrepreneurism, thereby creating lots of investment opportunities.

Matthews International Capital Management has been investing in Asia since 1981, and the firm prides itself, says Kenneth Lowe, portfolio manager at the firm, on “getting our hands dirty.”

That means combing Asia with a fine-tooth comb to ferret out the individual opportunities that mirror the firm’s long-term investment focus on the region: companies that have sustainable, long-term growth potential, strong business models, good management teams and, of course, low valuations.

According to Lowe, there are plenty of them – and they’re not necessarily a part of the region’s widely used indices, which Lowe believes tend to look backward without taking into account Asia’s full growth potential.

This is a diverse region, Lowe says, where countries span the gamut from those where families “are looking to put protein on the table” to others where the high level of discretionary incomes are driving the global luxury goods market. Asia also has “savings by the spadefull,” investments are high and social changes, such as the revamping of education systems, are bringing out the best in human capital.   

As such, Asian companies, Lowe believes, are naturally buoyed by the continent’s continued overall growth dynamics. That’s why he focuses on finding individual, quality stocks, “because the macro trends take care of themselves.”

Rick Schmidt, portfolio manager, emerging and frontier markets, Harding Loevner

Frontier market investing has its risks but also great reward

Today’s frontier markets remind Rick Schmidt, portfolio manager at Harding Loevner, of what emerging markets were like 25 years ago.

These countries that are scattered across the globe “don’t have length or breadth,” he says, and they’re quite restricted. However, they represent 20% of the global population and their growth potential is great.

Today, more and more advisors are interested in frontier markets, Harding said in a separate interview.

“The interest level is huge,” he said, “but not for investing: Advisors want to learn about frontier markets.”

The greatest advantage of frontier markets (the five largest, Harding says, are Saudi Arabia, Argentina, the United Arab Emirates, Nigeria and Pakistan) is that they’re only risky individually. As a portfolio, he says, they don’t correlate because “what happens in Ukraine doesn’t impact Bulgaria, and what happens in Laos doesn’t affect the Middle East.”

All the same, while some are braving the new frontier, the area is still new and any kind of instability can derail both perception and investments.

Take Nigeria, for example: The tragedy of the Boko Haram kidnappings as well as the recent firing of Lamido Sanusi, the Central Bank governor, hit the Nigerian market in a big way, Harding said in the interview, and despite the fact that Nigeria is an oil-rich economy, investors were quick to react to these events.

In today’s large and globalized world, investment possibilities are already plentiful and the choices continue to increase against the backdrop of shifting macroeconomic trends.

At Envestnet’s 2014 Advisor Summit in Chicago, three leading portfolio managers offered their perspectives on the international equity markets, where the best opportunities lie and why.

 

Michael Bennett, Managing Director, Lazard Asset Management

Stocks that have a good trade-off between value and financial productivity are the best bet.

Whatever happens at the macro level, both globally and within individual countries, is important to Michael Bennett, managing director and portfolio manager at Lazard Asset Management, but as a relative value investor “looking for stocks that have a good trade off between value and financial productivity,” his primary focus is looking for names that will do well regardless of what’s happening around them at a regional or global level.

 In 2011, for example, Europe’s woes dominated the news and “we were not bullish on Europe,” Bennett says. However, he did zero in on a few European stocks that despite suffering from the overall downturn in Europe, were nevertheless well positioned because much of their revenues came from outside Europe.

Today, valuations are much higher in Europe and Bennett has been reducing his European positions. However, he continues to apply the same approach when looking at opportunities in other parts of the world, including the emerging markets, where he believes there are great opportunities.

“You read a lot about China slowing down but I just read a stat that BMW increased its sales in China by 25%,” he says.

 

Kenneth Lowe, Portfolio Manager, Matthews International Capital Management

Asia’s long-term growth prospects will continue to support innovation and entrepreneurism, thereby creating lots of investment opportunities.

Matthews International Capital Management has been investing in Asia since 1981 and the firm prides itself, says Kenneth Lowe, portfolio manager at the firm, on “getting our hands dirty.”

That means combing Asia with a fine-tooth comb to ferret out the individual opportunities that mirror the firm’s long-term investment focus on Asia -- companies that have sustainable, long-term growth potential, strong business models, good management team and, of course, low valuations.

According to Lowe, there are plenty of them – and they’re not necessarily a part of the region’s widely used indices, which Lowe believes, tend to look backwards without taking into account Asia’s full growth potential.

This is a diverse region, Lowe says, where countries span the gamut from those where families “are looking to put protein on the table” to others where the high level of discretionary incomes are driving the global luxury goods market. Asia also has “savings by the spadefull,” investments are high and social changes, such as the revamping of education systems, are bringing out the best in human capital.   

As such, Asian companies, Lowe believes, are naturally buoyed by the continent’s continued overall growth dynamics. That’s why he focuses on finding individual, quality stocks, “because the macro trends take care of themselves.”

 

Rick Schmidt, portfolio manager, emerging and frontier markets, Harding Loevner

Frontier market investing has its risks but also great reward

Today’s frontier markets remind Rick Schmidt, portfolio manager at Harding Loevner, of what emerging markets were like 25 years ago.

These countries that are scattered across the globe “don’t have length or breadth,” he says, and they’re quite restricted. However, they represent 20% of the global population and their growth potential is great.

Today, more and more advisors are interested in frontier markets, Harding said in a separate interview.

“The interest level is huge,” he said, “but not for investing: Advisors want to learn about frontier markets.”

The greatest advantage of frontier markets (the five largest, Harding says, are Saudi Arabia, Argentina, the United Arab Emirates, Nigeria and Pakistan) is that they’re only risky individually. As a portfolio, he says, they don’t correlate because “what happens in Ukraine doesn’t impact Bulgaria, and what happens in Laos doesn’t affect the Middle East.”

All the same, while some are braving the new frontier, the area is still new and any kind of instability can seriously derail both perception and investments.

Take Nigeria, for example: The tragedy of the Boko Haram kidnappings as well as the recent sacking of Lamido Sansui, the Central Bank governor, hit the Nigerian market in a big way, Harding said in the interview, and despite the fact that Nigeria is an oil-rich economy, investors were quick to react to these events.

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