No. But investors entering this market for the first time should do their homework. They shouldn’t take a “top down” approach-that is, decide that Hong Kong stocks should amount to 30 percent of an Asian portfolio and buy accordingly. We’re stock-pickers and select companies for their potential appreciation, not their geographic location.
Traditionally, investors have tended not to look much beyond Europe. Now Japan, Singapore, Hong Kong are all on the radarscope. One of the attractions of international investing is finding exciting growth companies-you see much stronger earnings growth in Mexico, say, than in the U.S. that sell at a very reasonable cost. And because most international markets don’t necessarily track the performance of the U.S. market, it makes good sense to diversify. Our bull market has been an extended one, to say the least. In the future I would not expect to see returns exceeding 15 percent.
European economies are weak, but that’s not necessarily bad. if you’ve got slack in the economy, interest rates can come down-which is bullish for the stock markets.
We like to invest in companies that control their destiny, or that are benefiting from some development that we feel is under-appreciated or even unrecognized by other investors. For example, I own Cifra, the Wal-Mart of Mexico, which is expanding very rapidly. Mexican consumers are becoming wealthier. The economy is growing and will continue to do so, with or without NAFTA. There’s also a Finnish company called Nokia, very strong in the exploding international telecommunications market. Swiss banks are experiencing strong growth in the asset-management business, so we bought Swiss Bank and Credit Suisse, which just merged with Volksbank. I like Argentina’s Baesa, a Pepsi bottler in Buenos Aires, and the Chilean Telephone Company (CTC), dominant in a very underpenetrated market in a developing economy. I’m expecting 20 percent growth for CTC this year. In the United States, we like Gillette and Wal-Mart Stores.
Investing in the newest “hottest” emerging markets should be done with a great deal of caution. Don’t forget: as recently as 1987, when markets crashed around the world, the Hong Kong exchange was closed. If you wanted to get your money out, you couldn’t.
I keep half my assets in the Janus Worldwide Fund, half in domestic growth funds.
