Major markets such as Japan and Europe are dragging on global economic performance.
Yet, advisors may find some companies in those regions are performing well, says George Dent, investment manager at Walter Scott & Partners Limited in Edinburgh, UK. His firm manages the Renaissance International Equity Fund.
His Japanese holdings were up about 17% in 2013, he adds, and his European holdings were up about 25% over the same period. As well, Japan only dragged on Dent’s portfolio during the first half of last year since its economy stabilized.
Also, Japanese returns were lower during that period, he says, because he stuck with high-quality, international businesses, instead of switching to “domestically-oriented companies, which were perceived as the biggest beneficiaries of [economic stimulus] last year.”
Dent didn’t make changes since he expects those high-quality businesses to flourish over the long term. “If [we] do see sustained growth in Japan, that will open up more opportunities,” he adds. “[Even] if we don’t, these businesses have proven…they can continue to grow even when [the country] is stagnating.”
In Europe, he’s also focused on finding top companies that can withstand market volatility. Many stocks have shifted from being high-quality to value holdings, he says, and it’s hard to judge how long that trend will continue.
In emerging markets, Dent has monitored interest-rate volatility over the last year.
But he hopes the worst is behind us and says, “It does feel as if we’ve found…a bottom for emerging markets over the past few weeks.”
Currently, Dent’s indirectly accessing emerging markets through North American companies that have significant sales exposure. Still, he evaluates corporate governance and valuation trends before choosing to invest.
On the upside, he finds valuations have stabilized over the last year. And now, some companies are growing and meeting his criteria, which means he’s been able to top up some of his holdings. So, “when we do see a rebound, hopefully we can benefit from that,” says Dent.