67 WALL STREET, New York - December 20, 2012 - The Wall Street Transcript has just published its Best Investment Strategy Interviews of 2012. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Investment Strategies - Large Cap Investing - Investing in Emerging Markets - Investing in Energy - Value Investing - Downside Protection With Upside Participation - Macroeconomic Trends
Companies include: Aberdeen Latin America Equity Fund, Inc. (LAQ) and many others.
In the following excerpt from the Best Investment Strategy Interviews of 2012 Report, an expert Latin American portfolio manager discusses his firm's investment methodology, the regional outlook, and his top picks for investors:
TWST: How would you describe the firm's overall philosophy or investment strategy?
Mr. Robinson: The investment strategy that we use at Aberdeen is very simple. We try to take complexity out of every stage of the investment process. The investment process we use at Aberdeen on the equity team is the same across the firm, so you'll find the fund managers who are in the Sydney office use exactly the same process to select investments as the fund managers in the Philadelphia office, the fund managers in Singapore or indeed the fund managers here in Brazil. It's a very robust investment process that also requires a lot of discipline with a series of steps and rules that really define the investment process.
Firstly, we will never invest in a company unless we have met with management. Typically it may take sometimes a period of a few years for us to get comfortable enough with a company to invest in it, and that really leads to quite high conviction portfolios, and the portfolios tend to be quite concentrated. We have holding periods that are about five years on average. We do an awful lot of work on each company, both before we invest in that company and while we own that company, so we continue to follow up with the company, and every company that we own in portfolios we will visit that company at least twice a year.
Primary due diligence is part of the reason Aberdeen established this office here in Sao Paulo - one of the key principles of the investment process is to be located in those countries in which you invest. So that makes life easier in terms of visiting companies regularly, but also helps you understand the local culture, which hopefully allows you to make better investment decisions. The actual process we use for finding a company to invest in is essentially a three-step process.
The first step of that process we call the quality step. And it's important to say that if a company does not pass our quality step, we will not invest in that company. When we are talking about quality, we are talking about fairly straightforward criteria; we are talking about companies that have strong balance sheets, companies that are in good industries which demonstrate growth, and companies that have management teams that have demonstrated a commitment to the interests of minority shareholders in the past. So really we are looking for very straightforward, well-run companies.
If a company is deemed as high-enough quality, then we go into the second step, which is what we call the price step. And in this stage of the investment process we try to work out what is an appropriate price to pay for that company. When we're looking at companies, again, we try to keep things very simple. We examine price to earnings ratios, price to net asset value ratios, price to cash flow. We don't use items like dividend-discount models, as we think that they are overcomplicated and really not particularly useful. The second step of the investment process really is also about patience for us. We don't mind being very patient, to wait for good opportunities to buy an investment. Typically, if we think an investment has passed the quality step, then we may sit several years at the price step waiting for an opportunity to buy that company at a good valuation.
And then the final step of the investment process, the third step, is really just portfolio construction. How does this company that we want to put in the portfolio fit with all the other companies that are already in the portfolio?
TWST: We are going to focus specifically on emerging markets and investments in Latin America. Would you give our readers a snapshot of the Latin America Equity Fund in terms of its strategy and current portfolio?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.