When approaching emerging markets, do you prefer growth or value countries?
Without regard to individual Companies, on the macro, no two Emerging Markets are alike. That being so, in general (i.e. regardless of size, population, GDP), when you are looking for a country in which to invest, do you prefer countries that have a more established market, like a Brazil, Poland, or Russia, and can offer more of an "emerging value" atmosphere, or do you prefer a less established market, like a Bulgaria, Peru, or Georgia, which can offer more of an overall growth potential as the market becomes more developed? I'm really anxious to discuss this topic at length, so I would be glad to offer more information if required.
This is a great question, and I fear my answer may not completely resolve it. But I can offer a few thoughts. First, as a "GARP" investor, I always look for Growth at a reasonable price, so I disavow the false choice between value and growth. I want both.
As far as established Markets go, the advantage of an established market is that it has better liquidity and is more likely to attract a following. Stocks in Bulgaria, or Georgia, for example, are virtually unknown to traditional investors, and therefore will be harder to move in downtimes. If you're holding for the long-term, that shouldn't matter a great deal, but there's always an advantage in being able to sell something when you need to. Personally, I'd put Peru in a category with Poland, and perhaps countries like Turkey, in that they are fairly well followed, but not fully. This is the mid-range. Perhaps this is the best range, because if they become more fully followed, this is where your prices will rise fastest. I think everyone is already following the BRIC countries, while places like Poland and Peru offer opportunity now, as does Mexico, I believe, to grab the next wave of investment money. Bulgaria is still a few years away, so unless you've found a really outstanding growth company that you are confident will keep growing for years, it might be best to wait.
Finally, I look very closely at the political situation and society in general to determine if it's a nation I dare to invest in. Here, I find myself much more confident investing in Bulgaria than Georgia, for example, because I'm not as confident that Georgia's political status is fully safe, while Bulgaria is more stable in that way, I believe. So, I'd consider a good long-term growth holding in Bulgaria, while I'd probably avoid Georgia for now, despite what I think are probably outstanding opportunities.
4 Responses to “When approaching emerging markets, do you prefer growth or value countries?”
I prefer the BRIC nations. The reason is I've been to some of the BRIC nations and I've been to some of the other emerging nations. These other emerging nations have no chance to become an important player on the world stage for many many years. The risk you take with your money is extremely high and I don't see the reward justifying the risk.
There is also political risk involved in a lot of smaller nations. Peru for example just had their elections last year. The market was clearly jittery around that time because of the uncertainty in the election. Some candidates would've cause a lot of harm to foreign investors.
Don't forget Venezuela as well. With one decree, many assets were nationalized. This is typical of many latin american economies over the last few decades.
Political uncertainty in the BRIC nations certainly exist as well, but not as likely to completely switch regimes overnight (see Thailand and 20% drop in their market after the coup).
Comment made on March 7th, 2009 at 11:58 pmReferences :
Invest in an Emerging Markets Fund, such as FEMKX, DREGX, EEM, HLEMX and let the fund adviser make that decision for you.
This will diversify your investment more among industries as well as companies.
Comment made on March 8th, 2009 at 12:12 amReferences :
This is a great question, and I fear my answer may not completely resolve it. But I can offer a few thoughts. First, as a "GARP" investor, I always look for Growth at a reasonable price, so I disavow the false choice between value and growth. I want both.
As far as established markets go, the advantage of an established market is that it has better liquidity and is more likely to attract a following. Stocks in Bulgaria, or Georgia, for example, are virtually unknown to traditional investors, and therefore will be harder to move in downtimes. If you're holding for the long-term, that shouldn't matter a great deal, but there's always an advantage in being able to sell something when you need to. Personally, I'd put Peru in a category with Poland, and perhaps countries like Turkey, in that they are fairly well followed, but not fully. This is the mid-range. Perhaps this is the best range, because if they become more fully followed, this is where your prices will rise fastest. I think everyone is already following the BRIC countries, while places like Poland and Peru offer opportunity now, as does Mexico, I believe, to grab the next wave of investment money. Bulgaria is still a few years away, so unless you've found a really outstanding growth company that you are confident will keep growing for years, it might be best to wait.
Finally, I look very closely at the political situation and society in general to determine if it's a nation I dare to invest in. Here, I find myself much more confident investing in Bulgaria than Georgia, for example, because I'm not as confident that Georgia's political status is fully safe, while Bulgaria is more stable in that way, I believe. So, I'd consider a good long-term growth holding in Bulgaria, while I'd probably avoid Georgia for now, despite what I think are probably outstanding opportunities.
Comment made on March 8th, 2009 at 12:43 amReferences :
http://www.valueview.net
I agree with Richard..let a mutual fund do your research…staffs with countless people ( some working in the various countries) even in these times of " transparency", some people are able to get more important information ( informally) than what is published in obscure financial papers .
Comment made on March 8th, 2009 at 12:55 amHe also mentioned a favorite of mine FEMCX… I've made 140% on that in about three years…EUROX has been even better… also check FLATX and FINEX.
If you are going to still invest on your own, at least go to a financial site and check the " holdings" of those funds. Could be a starting point for you in individual companies or similar ETF's.
Best of luck.
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