(Excerpts from Reuters Global Markets Forum conversation)
NEW YORK Feb 14 Global investors miss some of
the best plays in emerging markets by focusing too heavily on
commodities and ignoring consumer sectors that deliver fatter
long-term returns, according to a Wall Street specialist in
overseas markets said.
Portfolio manager Charles Wilson of Thornburg Investments,
who oversees $1 billion of emerging market assets, told the
Reuters Global Markets Forum on Tuesday that patient investors
can easily top returns from energy and materials in developing
markets by focusing on the consumer discretionary, consumer
staples and healthcare sectors.
The following are edited excerpts from the conversation:
Question: Where is the sizzle in developing markets for
Answer: Data show that over long periods (10/15 years) sectors,
like consumer discretionary and staples, do better than
commodity sectors. The excess returns come from the fact you
tend to find better businesses that compound faster in those
sectors. It also has to do with the fact the markets are often
more consolidated and tend to lead to better pricing power.
Q: What do you look for in emerging market companies?
A: We tend to get involved when a company is over $1 billion (in
market capitalization). We know it's relatively established at
that point. We have much greater success with companies going
from $1 billion-$5 billion than from $500 million-$2 billion (in
market capitalization). There are quite a few companies in the
$1 billion-$8 billion category. Last time I checked, there were
3K to 4K.
Q: What are you looking at now?
A: We like domestic consumption stories that are somewhat
insulated from global issues/concerns right now. India for
example. We also think that China is progressing better than the
market fears and many companies are trading at good valuations.
One small cap we really like is IMAX China. They
are the local sub for IMAX. They had a really tough
2016 basically due to poor box office lineup, but we expect that
to turn around this year. We also expect them to continue to
sign large new theater contracts, which will drive long-term
(This interview was conducted in the Reuters Global Markets
Forum, a chatroom hosted on the Eikon platform. For more
information on the forum, or to join the conversation, follow
this link: https:forms.thomsonreuters.com/communities)
(Reporting by Michael Connor in New York; Editing by Paul