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Why a focus on Emerging value


Hello, there are several reasons:


1-Firstly I have always been fascinated by tales of growing exotic countries, starting in school with the Rise of Japan, Asian Tigers, and we even had a class about Cote d'Ivoire.

So this asset class sparks my interest from the start.


2-Then there is a valuation and cycle argument, simply explained here by another writer that is in the same vein. https://superfluousvalueblog.wordpress.com/2020/04/23/fertile-hunting-grounds/ .

EMs are cheap now, because we are at the end of a cycle (It cannot be the beginning) of US and tech outperformance, so they are left out, this is typical investor herd behaviour. Having lived in 4 countries myself, and reading news from several continents, I have zero interest in following a herd and a very critical set of eyes, I can see sheepish behaviour a mile away, and I can be too contrarian, so I have the opposite bias to fight actually.


I remember Buffett, or was it him I am not sure, that say "fish in the pond not fished". I am not the best analyst who will interview 30 people to know why company z will turnaround and grow 300% in ten years because of product Y currently in R&D. This is just too much effort. It is smarter, lazier, easier, to just go where there are not many analysts trying to outsmart each other on a full time basis, and just pick up the goodies left alone for cheap.


3-I have been disappointed by the lack of resources and writers on the subject. Luckily I have met a few people on twitter and blogs who share the same interest. I hate coming across some investment report and its all about the same few stocks. I get it, its a full time job for some people, so they have to analyse and re analyse the same stocks forever, and some of these stocks are fine long term investments (not at any prices however). Yes, Amazon has a strong moat. Google AI is cool. And Venmo too. thanks, the sky is blue, water is wet.


For my writing, I want to bring something new, I want to talk about the companies I have been researching and buying on the emerging market exchanges, screening them for myself. There are very popular and famous companies in EMS like JD,com and Alibaba, which I owned to good success, but currently they do not fit my investment goals of having some income+return and visible payback for their ventures. They are fine in portfolios with different requirements,


Many people are saying that EMs are riskier than DMs. I will disagree. I live in Europe and witnessed banks giving mortgages so people can fly to Vegas with the money, then going bankrupt and being nationalized or recapitalized, Ghost Cities built in the desert and abandoned, Brexit, and my region becoming virtually independent for a day, asking my colleagues "so, in what country are we now?" and hearing "I dont know" back.


Due to this, I won't be scared by an Erdogan or Bolsonaro or a Putin. This is not worse than what I lived and it is just perception.

My only exception is Duterte in the Philippines.

To conclude with the comparison, if Trump had been African what would have been the comments? If we had the Yellow jackets in Brazil?


If I was living in the USA or Australia, there would be more arguments for investing at home because these zones still have structural GDP growth, but in Europe, there is zero growth and fundamental challenges.


-Structure: EMs have better demographics, lower debt to GDP, higher equipments and consumption gaps to close, and resilient private sector and people. They do however, have challenges in lower capital available.


So this is in a nutshell why I focus on this segment. I aim to provide some quick unique stock analysis, to upgrade my listing of interesting defensive stocks, and to give portfolio updates.


My next post is planned to be about the different types of EM stocks. Thanks for reading and welcome!




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