Equities

What does Russia’s invasion of Ukraine portend for China and Taiwan? How do you identify quality companies amid unpredictable regulatory and political environments? How should you consider absolute risks on a country level? Cheryl Gedvila, Client Portfolio Manager, addresses these difficult questions to help investors navigate markets today.

Unglamorous stock research, resisting the whims of the markets, and preparing for the worst can be downright boring. But it’s a great way to find quality international companies that can help reduce portfolio risk and improve downside protection – exciting results during these uncertain times.

Market sentiment reflects growth that will continue at past levels, yet economies and businesses globally are facing stiff headwinds – high government debt, rising inflation, and supply chain bottlenecks. As markets shrug off risks, expect volatility and a divergence in company performance in 2022.

The latest plot twist of the pandemic may have spooked markets in recent days, but the underlying sentiment is still one of worrying exuberance and investors are overlooking businesses in the consumer staples, health care and discretionary sectors that are still in the process of normalizing.

Local know-how goes a long way in emerging markets (EM). Regional e-commerce and consumer companies are increasing market share by adapting to local preferences. Some quality companies are benefiting from this and other EM trends, such as expanding demographics in the online gaming market and rising barriers to entry in semiconductors.

Portfolio Manager Chul Chang discusses valuations, opportunities in technology and industrials, rising debt levels and ESG considerations.

The nature we depend on is bleeding as natural habitat is cleared to support population growth, consumption and waste. Nature, society and the health of our portfolios are interlinked. This blog ties biodiversity hot spots to the impact of individual companies. Get ahead of risk and regulation.

Aided by social media and e-commerce, startup brands are increasingly taking share from legacy consumer packaged goods (CPG) companies. Meanwhile, retailers are launching far more sophisticated private-label brands. Which CPG companies are adapting to survive these threats? And do CPG stocks still play a role in portfolio construction?

To many, investing in sustainability is commonsense. To some, it is more of a bureaucratic waste of time with onerous new regulations. To us, it is clear that ESG is an integral part of evaluating business quality because, simply put, sustainability has a material impact on long-term value.

Recently Chinese regulators have become more assertive, causing concern among the international investor community. The key in helping investors navigate and, hopefully profit from these changes, is to understand the bigger picture and what the government is ultimately trying to achieve.

The Chinese government has recently instigated a far-reaching crackdown on privately-owned businesses in China. Chinese shares listed on foreign exchanges have reacted more negatively than A-shares to this increased government intervention. What risks does this pose to foreign investors and how can they prudently navigate the equity markets of China and Hong Kong?

Inflation is more than just an acceleration of prices; it is bad for economic growth and prosperity. We disagree with consensus that cyclical stocks –financials, industrials and commodities – are the best defense against inflation. Instead a portfolio of quality stocks can be the right approach.

10 million lab animals undergo tests with severe pain each year. Over time, companies have aligned with customers. The near-term exit for lab animals relies on regulators. A 2021 breakthrough in China shows progress. But the underlying driver is remarkable advances in technology. Management views and outlook in this blog.

European equities have lagged the US for more than a decade. But there are reasons to believe that Europe can outperform again: The benchmark is now more exposed to higher growth companies, valuations are attractive, macro reforms have mitigated risks and Europe is leading the way in ESG.

High-growth, high-momentum stocks were among the best performers of 2020, then value stocks rallied into the first quarter of this year. We are cautious of valuations, as some stocks have already priced in a recovery. Investing in quality companies with predictable earnings power at reasonable valuations can help investors prepare for a rainy day.

Strong momentum across many markets has increased investors’ concerns about inflated valuations. As the “growth-at-any-price” trade seems to be fading, many believe a rotation out of growth stocks and into value may continue to outperform the broader market. Before you rearrange your portfolio in light of the current rotation, here are a few things to consider.

Chinese equities can offer an exciting and dynamic opportunity, but investors must navigate a complex regulatory environment and quickly changing competitive dynamics. Our research team sheds light on the outlook for e-commerce giant Alibaba, how to approach the A-shares universe and pressing issues investors face in China today.

Even as the broader geopolitical environment and global economic uncertainty continue to impact the headlines on China, strong growth prospects underpin several sectors and companies.

While the US is home to many global leading companies, it is not the be-all and end-all for investors. Actively allocating to international equities can bring the benefits of diversification. We believe a portfolio that combines the best of domestic and international quality growth equities is the right choice for long-term investors today.

Airbnb’s stock soared after its IPO, but it is not yet profitable and faces many competitive threats. Meanwhile, its rival Booking Holdings is an established leader with a proven business model and a more earth-bound valuation. We think Booking is a true quality company with a solid track record, not a speculative bet.

While higher interest and inflation rates may more predominantly impact owners of long-duration assets in a variety of ways, they are also simply a positive signal of strong economic growth, which is a good thing. They also should enable for a more generally healthy pricing environment for risk assets. Higher interest rates are not necessarily something terrible to be only feared.

With US President Biden’s $1.9 trillion Covid relief package, alongside the recently proposed $2.25 trillion in infrastructure projects, there is growing concern about the impact these programs could have on inflation and interest rates globally. In the investment world, we have been operating amid declining rates and low inflation for so long that few may realize the impact rising rates would have on investment returns.

Stop fraud bleeding returns. Fraud from related party transactions, kickbacks and fiddling the books can run for years. The steps to minimize risk are based on 3 governance structures – independence from management is key. Amazing how often they are not in place, especially in some markets.

All-star New York Yankees pitcher Lefty Gomez once said: "I'd rather be lucky than good.” Successful investing over time is, however, not a game of luck. It requires discipline, skill and a focus on quality. Investors can prepare for a downturn by focusing on quality businesses with predictable earnings growth.