Mobius on Emergings

Emerging markets showing mature markets a clean pair of heels

2010-07-19T14:01:00.000-07:00

Posted By Prieur du Plessis

It comes as no surprise that the MSCI Emerging Markets Index has been solidly outperforming the Dow Jones World Index since the low of October 2008, as seen in the relative strength chart below (a rising line indicates outperformance by emerging markets and a declining trend the opposite).

Listen

Emerging hedge funds

2010-04-13T03:06:00.000-07:00

Notes from Mark Mobius

Generally, they are very active traders. One benefit of the hedge fund trading is that they increase the liquidity in the market..

Hedge funds’ high trading, plus the fact many borrow money on top of client capital to invest, can magnify their impact.

Since some of the price movements are very great when hedge funds are trading in a particular stock because of derivative actions, prices very often move too far in the overvalued or undervalued territory.

Investment Week 09 Apr 2010

'Web Presentation"

2010-04-06T15:04:00.000-07:00

Web presentation from Mark Mobius

Dr Mark Mobius, presented "The Outlook of Emerging Markets," to an audience of over 500 clients of Craigs Investment Partners in New Zealand.

PowerPoint slides in pdf are on the web site. Be warned, the show is about one-hour long. You can skip the intro and the questions and concentrate on the cheese. It is conveniently divided into eight chapters, including themes such as global and emerging-market situations, consumers and commodities. ~ 29 January 2010

Moneywise's Investment Trust Awards

2010-03-31T15:21:00.000-07:00

Nathalie Bonney picks out the top performers in the 2010 Moneywise's Investment Trust Awards.

EMERGING MARKETS

Emerging Markets Winner: Templeton Emerging Markets IT
Fund manager: Mark Mobius
Fund size: £1,739 million
NAV % performance over five years: 275.1%
Share price return over five years: 298.1%
Volatility (5YR%): 32.4%
Total expense ratio: 1.45%
Highly commended: JPMorgan Emerging Markets Investment Trust

It's the second most successful sector over 10 years, according to the AIC, growing by 284%.

Ranked number one with all four judges. Cockerill is impressed that "despite being twice as large as the next closest in the sector, it remains the best performing fund".

Managed by Mark Mobius, who has a wealth of knowledge on emerging markets, Templeton Emerging Markets Investment Trust invests in Latin America, emerging Europe and Asia from companies in information, manufacturing and services.

Just behind Templeton is JPMorgan's Emerging Markets Investment Trust. Brazil is its largest country weighting at present but Moore thinks that the Asian part of its portfolio represents its likely growth areas. "This is a core global emerging markets fund with a high exposure to China and India. This trust should benefit from the expected growth in these two countries."

The Case for Frontier Markets

2010-03-19T19:58:00.000-07:00

Notes from Mark Mobius
Lara Crigger caught up with Mobius about the case for investing in frontier markets, including what makes a good frontier market, what connection they have to commodities, and why frontier markets offer lower volatility than many developed markets—including the U.S.

So why should investors consider adding frontier markets to their portfolio?
What's the appeal of these tiny, illiquid economies?

Mobius: The first and foremost appeal is the valuation. In these markets, we're able to find cheaper stocks that are significantly better valued than those in normal emerging markets. That's not true of every single company, of course, but it's certainly true of many. Of course, the reason why these frontier markets tend to be cheaper is because they have not yet been fully discovered by investors. They tend to be under-researched, and not so readily available to normal investors.

What do frontier markets offer investors that emerging markets don't?

Mobius: Well, frontier markets are really just a subset of emerging markets. In the future, we expect these frontier markets—at least some of them—to become quite important, and to even become full-fledged emerging markets or greater. When we started the very first emerging markets fund in 1987, at that time, it was impossible to find markets that were liquid and researched. So in some ways, we're returning back to where we were at that time.

Many frontier markets are very resource-rich. Do frontier markets make a good commodities play?

Mobius: The commodities arena is really very wide, and it includes normal emerging markets as well as frontier markets. In fact, I would say that one of the attractions of frontier markets is not only that they're in the commodities arena, but that they're also an opportunity to get into the consumer arena more easily.

When you look at disposable consumer goods, the large multinationals are usually the first in. They buy up the large companies that are established brands, and very often these companies don't find their way into the equity markets. In the frontier area, there are more of these available.

When investors look at a frontier market, what criteria should they use to evaluate whether it's a good investment or not?

Mobius: We use the same criteria that we would use for any market in the world. First and foremost is the balance sheet. We look at whether the company is faithful, in terms of its balance sheet. Then we look at earnings and earnings potential. And most importantly, we look at management. In emerging markets and frontier markets alike, the management capability is extremely important. You've got to get managers who are capable of managing in challenging environments.

Of course, there is one challenge that we get in these markets, and that is the custodial situation. We need a custodian bank who can safeguard our assets, look after dividend collection and so forth. That becomes a challenge in frontier markets. And at Templeton, we're actually pioneers in that area.

Frontier markets come with a lot of risks. What are some of the risks entailed with investing in frontier markets?

Mobius: That's an interesting point about risk; in fact, our studies show that the frontier markets do not necessarily have greater risk. That's because in many of these markets, the volatility is not as great as in other markets, including developed markets, since the markets are not so liquid. Thus there tends to be less volatility, and therefore less risk in that sense.

That certainly goes against the conventional wisdom of frontier markets being these "high risk, high reward" marketplaces.

Mobius: Exactly. I know there's that impression, and that impression carries over to emerging markets as well. But if you look at a diversified frontier markets portfolio, you'll find it has less risk than a portfolio, say, in the U.S. or in Canada. Diversification is key, of course. But the other important thing is dispersion in behavior between the frontier markets; in other words, these markets tend not to move in the same direction at the same time. With that dispersion, you have greater safety, because you have less volatility.

What do you see as some of the most promising countries or regions in the frontier market space?

Mobius: If you look at our portfolios, you'll see that the leading countries in the portfolios are Vietnam, Kazakhstan, Ukraine and Nigeria. Those are the top ones, and of course we're in many other markets around the world, and that lineup is subject to change. But those are the big four in our frontier market funds right now.

Vietnam certainly is attractive right now, with a growing economy and a population half of which is under 25. Why the other three?

Mobius: Kazakhstan is in natural resources. Ukraine is agriculture. And of course, Nigeria is big in banking and consumer products.

The Case For Frontier Markets

Jesse Livermore: World’s Greatest Stock Trader

2010-03-16T23:36:00.000-07:00

Notes from Mark Mobius

The True Life Story and Time-Tested Strategies of the World’s Greatest Trader

“Terrific. I started reading it when we took off from Seoul’s Kimbo Airport on my way to Germany. By the time we reached Novosibirsk, Russia . . . I had finished it. I just couldn’t put it down!

Not only is it a great lesson in investing and trading, it’s a fascinating psychological study of what makes a great speculator tick. The rise and fall of a great speculator as well as the rise and fall of his family is great reading.

The fact that it is based on interviews with Livermore’s survivors and witnesses to the events makes it even more interesting. Great writing.” –Mark Mobius

Emerging Markets Q&A

2010-03-11T04:29:00.000-08:00

Notes from Mark Mobius

What are the pros and cons of investing directly in emerging market equities and bonds as opposed to companies based in developed markets with emerging markets operations?

By directly investing in emerging market equities you obtain full exposure to emerging markets while with investing in developed market companies with emerging market operations, you don't get that full exposure and you also get slow moving markets with lower growth potential mixed in. One advantage of some developed market companies is that they could have a global coverage thus giving the investor a more diversified coverage. Of course, there are also some emerging market companies that have that kind of coverage as well.

Some commentators are saying that frontier markets represent some of the best contrarian investments at the moment – do you agree with this and why?

Yes, that is certainly the case. For example, many people would never invest in Nigeria or even might not even visit the country for fear of confronting violence but actually there are excellent investment opportunities. So there are opportunities simply because those opportunities are not attractive to other investors since they are not familiar with the possibilities.

Qatar, Kazakhstan and Nigeria are among those countries being cited as ones to watch this year – why do you think this is?

Those are some countries that are citied as being watched but we should add a number of others such as Vietnam, Romania and a number of others. Qatar, Kazakhstan and Nigeria are all being watched because of their natural resources: Qatar - gas, Kazakhstan - oil, and Nigeria - oil.

Source: Mark Mobius, Franklin Templeton Investments – Emerging Markets Overview, March 10, 2010.

General Thoughts

2010-02-27T12:10:00.000-08:00

Notes from Mark Mobius

Hello, do you have any general thoughts for people starting to invest in the markets? - Andrea, Budapest

I believe it is important not to jump headfirst into any market without first deciding what risks you are willing to take. Also, you should separate the money you need for your daily life from the money you are willing to put away for a few years (preferably five years). If you do decide to invest, it is important that you invest your money not just in your own country but in a diversified global portfolio. In this way, the volatility of your holdings is likely to be less and you will gain exposure to markets all over the world. Dollar cost averaging is also important: put aside a fixed amount to invest every month and invest that amount regardless of the market level.

Reader's Questions

Global Strategy

2010-02-11T14:35:00.000-08:00

Notes from Tom Wu, in Cebu, Philippines

Mark Mobius with Tom Wu

Our global emerging markets strategy includes investments in over 20 emerging economies. As bottom-up investors who look at companies on a stock-by-stock basis, .. where there are opportunities and bargains in many of these markets, which we believe, are trading at attractive price-to-earnings and price-to-book ratios.

It is important to note that while investing in emerging markets may offer higher returns, aligned with these returns are more risks such as greater volatility, currency fluctuations, less liquidity and differing legal standards.

In view of those risks, our team’s investment approach is to adhere to the Templeton principles of value investing and fundamental research, seeking the best long-term investment bargains in emerging markets.

In general, we look to buy and hold an investment for an average of 5 years and we do not let short term market noise distract us, in fact those periods of extreme market volatility often provide the best buying opportunities. In addition, we diversify across markets, industries, and companies to minimize risks in our portfolios.

It is also our experience gleaned from years of investing in those markets that has taught us how to evaluate every situation for potential short-term and long-term impact. It is important to understand whether an issue is just a short-term blip or has the potential for longer-term repercussions.

Insights

Ten top emerging markets

2010-02-05T13:55:00.000-08:00

Notes from Mark Mobius

1) Brazil

“It’s gone through an incredible transformation under President Lula. The resources sector is pretty important and there is also an active consumer sector. A number of banks also look interesting prospects right now.”

2) China

“This is the world’s fastest growing major economy and a big rise in per capita income is fuelling demand for consumer products such as cars.”

3) India

“This is the second fastest growing major economy. India is one of the most important commodity producers, especially of minerals such as iron ore. Its educated workforce is also a strong plus point and they have helped create many software consulting companies.”

4) Thailand

"The country has been handicapped by political concerns but a consumer revolution is now taking place. The banking system is ripe for growth and there are oil and gas deposits in the Gulf of Siam.”

5) Russia

“Russia has huge natural resources, including oil and gas but also nickel and palladium, which are much in demand. The Russians also possess considerable technological skills, thanks to their education system.”

6) Turkey

“This has been a favourite of mine for some time. I like the entrepreneurial spirit of the people and we have invested in banks and petroleum retailers.”

7) South Korea

“It has recently recovered from a dip and is beginning to come up again. We like the construction sector and the energy sector.”

8) Indonesia

“At 237 million Indonesia has a bigger population than eaither Russia or Brazil. It is a huge potential consumer market which we are keen to tap into.”

9) South Africa

“It has lots of problems but it also has some very attractive companies, such as Anglo American, the mining company. South Africa is a good way of obtaining exposure to the mining sector.”

10) Singapore

“This is an attractive place to do business and it has one company that we especially like: Dairy Farms South Asia, which has spread out from farming into retailing and food production across southern Asia.”

Money Central

January 25, 2010

Full Bull Run

2010-01-31T16:25:00.000-08:00

Notes from Mark Mobius in New Zealand

Mobius manages an investment trust which it based out of the United Kingdom. About 4 per cent of the money invested in his trust comes from New Zealanders. The investment trust, which is listed on the New Zealand stock exchange, as one of the best performers this year.

"I was very surprised we have a big following here." says Mobius. It's not the first time he has visited New Zealand, five years ago he did a cycling tour of the South Island. New Zealand is not an emerging market, unless we can find a company which has over 50 per cent of its business in emerging markets."

However he has invested in New Zealand in the past. "Many years ago we did invest here in a salmon farm."

At the moment his eyes are firmly focused on the emerging economies of Brazil, China, India and parts of Eastern Europe. Mobius says the Emerging countries are in a full bull market run, which will last longer than many have ever seen.

"Bear markets tend to be very short in duration. Given all the economic factors things are looking up for these countries - GDP growth is higher - four times that of western countries, foreign reserves are high and they have low debt." There has always been a perception that emerging economies are riskier than their Western counterparts but Mobius, who has been investing in these regions for than 40 years, says that's not the case.

"If you look at what has happened in the US - the Madoff scandal, Lehman Brothers and Bear Stearns - lots of money has been lost. The corporate governance is not any better." But from a country perspective Brazil is at the top of his list followed by China and India.

Unlike China, Mobius says Brazil is self-sufficient because it has its own fuel and food. "All these factors are quite different from China which needs to import lots of things." It is China's dependence on other countries that could make it more volatile and Mobius warns the biggest risk to its growth would be a trade war between China and the US or Europe, although he doesn't think that is likely.

"Even though they are moving toward domestic consumption they are still very dependent on exporting." But he is still upbeat on China, which is predicting 8 per cent growth this year. "We think it will continue to grow, although it has to slow down eventually."

He is not worried about talks by the Chinese Government to clamp down on bank lending. "That has been very spotty - in very specialized businesses. I don't see this as a major problem, it can prevent a bubble from forming." He is convinced China can achieve growth of more than 5 per cent for the next 10 years, which is good news for countries like New Zealand.

Mobius' investment trust has grown 1746 per cent since it was launched in 1989 more than double the MSCI Emerging Market Index, which is up 854 per cent over the same time. He also had drawdowns during the global financial meltdown and market crash in 2008. The trust was down 40.8 per cent, slightly more than the index, which fell 35 per cent. But in the last year it has regained even more ground bouncing back 95 per cent in the year to December 31.

Despite more than 20 years managing the investment trust Mobius says he is not thinking about retirement. "Everyday I am learning something new. That is the great thing about this business. You have to be willing to take on new ideas and changes, you have got to be able to react to them."

Mobius visits New Zealand

Mobius on frontier markets

Wealth

2010-01-21T12:18:00.000-08:00

Notes from Mark Mobius

In order to allow wealth to filter down fairly, we must have a capital market that enables the person on the street, who invests in stocks or mutual funds, to be treated as fairly and equally as the wealthiest person.

We often see stock prices rise as a result of both increased earnings prospects and perceptions of good corporate governance.

The more comfortable a company’s management makes investors feel about investing in them, the greater the supply of investors will seek to do so. The increased demand for shares contributes to higher share prices, which then results in a premium.

Corporate Governance

Valuations and Corrections

2010-01-16T20:57:00.000-08:00

Notes from Mark Mobius

Emerging Markets Valuations

One of the best single indicators of value is the price-to-book value (P/BV). If you look at average valuations over the last ten years, you will see that the low point was about one time P/BV and at the high was about three times P/BV. We are now about two times P/BV.

So in terms of the historical valuations, we appear to be in the middle of the range - not excessive, but not as cheap as we were before.

Unless there is certain monetary tightening in these emerging market economies, I think current valuation levels are sustainable.

Clarification on Market Correction

In a Bull market as we are now experiencing, there will be corrections as the market continues to march upwards, and such corrections could be anywhere from 15 to 20%, or even 30%.

I want to emphasize that I am not predicting any specific correction but I am just saying that we have to prepare for such corrections and that we not be alarmed by them given current market conditions.

We expect these kinds of corrections in emerging markets and rather than focusing on when a correction might happen, we focus on picking up investments that in our view have dropped to compelling valuations as a result.

Sharing Investors’ Queries January 15, 2010

Looking Forward to 2010

2010-01-05T17:57:00.000-08:00

Notes from Mark Mobius

2009 was an amazing year in the way that emerging markets rose like a phoenix from the ashes. Emerging markets surged in 2009 as a result of many factors, perhaps most significantly the rapid increase in money supply due to global stimulus packages. Solid economic growth, high foreign reserves, low debt-to-GDP ratios, stronger domestic currencies, a rebound in commodity prices, low inflation, low interest rates and investors’ desire for higher gains also supported strong asset flows. In the first 11 months of 2009, emerging markets recorded nearly US$75 billion in net inflows, nearly 40% more than the record-high US$54 billion of net inflows in 2007.

While I am positive for emerging markets in 2010, given their greater volatility, I also expect corrections along the way, especially following a rapid run-up like we saw in 2009. I welcome these corrections most of the time because to me, they mean that valuations will become more reasonable, presenting buying opportunities. I believe valuations are still not excessive, since we are now around the middle of the 10-year historical valuation range, according to our analysis.

In my opinion, a few factors could inhibit the rapid rise of emerging market equities in 2010:

1. Robust activity in the IPO market, which could draw substantial assets from existing positions. Our calculations indicate that more than $250 billion in IPO proposals are waiting to come to market.

2. Volatility in commodity prices, which are characteristically highly volatile, despite (or perhaps consequent to) their sharp rise in 2009.

3. To the extent that the major U.S. market does not gain traction for imports, it could have a knock-on effect for emerging market exporters, even though big markets such as China have themselves become large importers.

4. Risks inherent to emerging markets, such as the inability of governments to control derivatives markets, loss of investor confidence, over or poor regulation in various industries, adoption of protectionist measures, or abandonment of the market economy philosophy.

However, I believe the fundamental strengths of many emerging countries will see them through to a high-growth trajectory in the medium to long term. Looking to 2010, I remain positive on emerging markets for a number of reasons:

1. Thanks to huge stimulus packages implemented globally, many countries have already returned to positive growth and I expect that growth to strengthen in 2010.

2. Risk-adjusted returns on capital and domestic demand growth in emerging markets is higher than those in developed countries, continuing to attract capital investments to emerging nations.

3. Credit expansion for real estate investment continues in a number of emerging market economies.

4. Several markets have major infrastructure construction plans, which should lead to substantial economic activity.

The BRIC countries in particular (Brazil, Russia, India and China), are among the world’s fastest-growing economies. Together, they account for more than 50% of the total population in emerging markets, and domestic demand remains robust. I believe they will continue to be a key driver of global economic growth. In 2009, growth in China and India, the world’s most populous countries, outpaced growth in developed countries despite the global economic slowdown. The International Monetary Fund forecasts GDP growth for the two countries in 2010 at 9.0% and 6.4%, respectively. Meanwhile, Brazil and Russia are resource-rich countries and are likely to benefit from rising global demand for energy, metals and other commodities, while their domestic markets continue to flourish. In addition to traditional emerging markets, the progression of a “younger generation of emerging markets” – the frontier markets – should prove to be exciting as these markets come to the forefront.

I expect to continue to find investment opportunities in emerging markets during 2010 and believe that there may be an increasing amount of money directed to the asset class over the next 10 years, as investors realize that they may be able to buy better value at a better price, compared to developed markets. The rapid developments in emerging markets should allow these markets to command even greater attention in the global investment universe. In my opinion, emerging markets such as China, Brazil and India could eventually become some of the world’s most important and influential countries.

January 5, 2010

Investment Rules for the New Year

2009-12-28T17:44:00.000-08:00

Notes from Mark Mobius

Making or preserving

money in capital markets is not an easy task, especially in these volatile times. It requires a lot of research, hard work and most important of all, discipline. I hope that you can start your investing year off on a good foot, and so I’d like to share with you a few investment rules I’ve picked up over the years.

1. Diversification. I think that your best strategy to plan against unexpected events such as earthquakes, political upheaval, floods, investor panic and the like, is diversification – not only within a particular market, but also across markets globally. You never want to be overly dependent on the fate of any one stock or security, particularly if you don’t have control over a company’s management or events. Some successful investors with a limited number of holdings believe in the school of thought “put all your eggs in one basket – but watch that basket carefully”. But these investors often have some influence on companies and management. Most investors are not able to do that, and if you fall into the latter category, you may be better off diversifying across countries and companies.

2. Don’t be afraid of risk. Without risk, I believe it is difficult for your portfolio to aim to achieve superior investment returns. But that risk-taking is not the same as playing roulette or skydiving. The assumption of risk I’m talking about must be carefully planned and researched. Having said that, investment decisions always require decisions based on insufficient information. There is never enough time to learn all there is to know about an investment, as equity investments are undergoing continuous change. There comes a time when a decision must be taken and a risk acquired. The ability to take just the right amount of risk based on the most diligently researched available information, in my mind, is the mark of a good investor.

3. Make volatility your friend. Markets are volatile, like a combustible material. You can warm up gasoline until a certain point, after which it ignites and explodes. But these market explosions give us an opportunity to buy low and sell high, as long as you have been wearing protective gear (such as diversification). The extreme sensitivity of markets to any news, what I call their “manic-depressive” nature, means that they often rise and fall by much more than they should. Remember that the time of maximum pessimism is the best time to buy and the point of maximum optimism is the best time to sell. If you can look beyond the emotional rollercoaster of the volatility and use it to your advantage, you might be able do rather well on your investments.

4. Take a long-term view even if you desire short-term rewards. If you take a long-term view of the world and the markets, you are likely to (a) be less emotional and thus less likely to make costly mistakes, (b) see beyond the short-term volatility of the market, and (c) take a step back to see broader patterns of market, political and economic behavior that may not be evident to a short-term observer.

December 28, 2009

Turnaround Target: Dubai

2009-12-23T16:26:00.000-08:00

The National Abu Dhabi

We were buying during this crisis because we felt that from a longer-range point of view there were good opportunities. We think Dubai will continue to lead the move toward greater disclosure, more transparency and a boom in tourism and knowledge industries.

Of course there are hiccups and problems along the way, but .. the environment is very good for investors .. with prices coming down, and of course the negative views and the problems will not go away.

A turnaround in Dubai could come “very quickly,” thanks to bullishness among foreign investors and growth in the world money supply as central banks keep interest rates low.

The newly printed money sloshing around the global economy from government stimulus programs needs a destination, and the Gulf will surely be one of the places it goes.

If you have this pressure of money supply building up, banks have to eventually start lending again and they must find places to lend.

Openness from the Government about its policies and plans was crucial to Dubai’s recovery. It should also adopt more liberal immigration policies akin to those in Hong Kong and Singapore to attract skilled workers to the country, and take steps wherever possible to facilitate smoother flows of labor and capital.

The only weakness may be in censorship of the media; it’s got to become more open. The degree to which they become more liberal in that respect will help them in attracting people and attracting ideas and opening up the financial system.

Turnaround may be a quick one

December 17. 2009

EMs in 2010 and why the sentiment is bullish

2009-12-21T22:57:00.001-08:00

Emerging Opportunities Video

We have been and we continue to buy. Of course, we are looking for good prices. So as the markets up and down, we are trying to get the low points ..

This is the, kind of correction that we would expect in the bullish environment we've had for almost one year now. So, 20% should not be surprising. China has already corrected by that much. So that could certainly happen.

What we are seeing is a mid point. We are now at the middle of the valuation range. At a low point in the last ten years it was one time's book. At the high point, it was three times of the book value now it's about two times. So we are more or less in the middle of the valuation range .. the bullish trend is definitely with us and we think it will continue into 2010.

But if you look at the big picture in terms of large amounts of money we have in our large funds, it would be China, Brazil and following that India and Russia.

There are two sectors that we are emphasizing. First is commodities. We believe that commodities will continue to trend upwards because the demand-supply situation is such that we see higher prices.

The second area would be consumers; per capita incomes are going up at a very rapid rate; you can see shopping everywhere you go. The big malls are being built.

On the commodities front first and foremost oil companies because they are going to continue to have very good cash flow and growth.

Mining companies, companies that produce nickel, platinum, gold etc. And then some of the agricultural companies, because we see shortages in allot of the commodities going forward.

I do see further rises. Of course, you are not going to see percentage change that we've seen so far because we came from a really low base in the end of last year and the beginning of this year. But I see further increases.

We must remember that with interest rates where they are if you take the reciprocal of the interest rate you can tolerate a very high PE ratio. So, I think we got to see the PE ratios in relation to where the interest rates are.

I am looking forward to a very good 2010 with of course corrections along the way. It is not going to be in percentage terms as exciting as it’s been up to now but I think we are going to have a very good 2010.

So a very rapid rise in prices, so that we get too much excitement in the market and sort of bubble mentality that would be a bad sign. Then of course a rapid increase in interest rates and inflation: that would be a bad sign too because that would mean restriction in money flows and general tightening of the credit markets.

verbatim transcript

Have emerging markets moved too far too fast?

2009-12-17T12:51:00.000-08:00

What was behind the huge runup in emerging markets in 2009?

With the subprime shock, everybody was looking for safety. And for some strange reason, they thought the U.S. dollar was safe and went into money market funds until January or February of 2009. Then people began to wake up to a few things. One was that the supply of currency would at some time outpace demand, so value would decrease .. that created this incredible liquidity looking for a home as people woke up that they should think about inflation coming down the pike. They weren't getting any yield on dollar deposits, so equities were the obvious answer.

Have emerging markets moved too far too fast?

The percentage increases are a bit misleading because you are coming from a low base. We are only halfway toward the previous high of 1997.

Have we gone too far?

The only measure we have is valuations, and probably the best single measure is price-to-book value ratio. If you look at the average price-to-book ratio based on the stocks in the MSCI Emerging Markets Index, we are only halfway to the 1997 high. The absolute high was three times book, the low was one times book, and now we are at two times book, roughly.

Apart from all the money in the system, what is driving the emerging-market rally?

Fundamentals. If you look at any time period—10 years, 3 years, 1 year—emerging markets have outperformed U.S. and global markets. Their economies are growing faster, four times faster. And during the 1997-1998 Asian crisis [policymakers in] emerging markets realized they needed strong balance sheets at the national and company level and had to build up foreign reserves, which they've done. They were building up reserves, keeping their currencies low, and reducing debt. Their debt-to-gross-domestic-product levels are way below developed markets, and when you look at the foreign exchange picture, it's even more impressive. Russia has $400 billion in reserves; China, $2 trillion. So where do you want to put your money? Obviously, emerging markets are the place.

What themes are you investing around?

Commodities are a main theme. We are looking at $70 per barrel in our model. Another theme is consumers, because the per capita income of consumers in emerging markets is going up.

How do you expect emerging markets to perform in 2010?

You cannot expect the same kind of percentage increases, but that doesn't mean you can't have a very good return. We are not in the mode of selling massively or getting into cash, that's for sure. That's probably the consensus opinion, which is usually dangerous. But we are finding companies with good dividend yields, companies that are growing.

Investment Outlook - Global Opportunities

Finding Opportunities

2009-12-11T01:58:00.000-08:00

Notes from Mark Mobius

We are finding opportunities in almost all emerging markets. Our ground-up research process locates opportunities in countries where the political or economic outlooks may not, at first appearance, look good.

We believe commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. We also favor consumer stocks. With rising per-capita income and strong demand for consumer goods and services in many emerging markets, we believe the earnings growth outlook for these stocks is positive.

The nature of markets is that there will always be booms and crashes since people tend to get either too optimistic or too pessimistic. The good news is that on average, bull markets have lasted longer than bear markets, and bull markets have gone up in percentage terms more than bear markets have gone down.

When markets are down, it is the best time to start looking.

Readers’ Questions Answered

Mobius on Volatility

2009-12-08T21:24:00.000-08:00

Notes from Mark Mobius

There are many people who say that with the rapid increase in money supply, we’re going to see a return of inflation. We believe that inflation is a risk in India, as in many parts of the world, but that it will not happen suddenly and will take time to develop. One of the good things happening globally is the trend towards higher productivity. With higher productivity, inflation should not move up because goods are being produced at a lower price.

Given the large amount of liquidity in the market, we believe a Dubai-like situation or other corrections in the market might surface in some areas further down the road if over-spending and over-leveraging go unchecked. Despite this, we find that there are still opportunities in the market, and we are making some strategic investments in Indian companies.

Volatility resides in all markets and bad times can be good times for investors, which is why we always emphasize the importance of bottom-up research and looking at stocks on a company-by-company basis.

Searching for Bargains in India

Corrections Are Part of the Market Cycle

2009-12-01T00:50:00.000-08:00

Notes from Mark Mobius

In any bull market we expect that there will be corrections along the way. These corrections can be quite healthy, because to us it means that valuations will come down to more reasonable levels.

We view these opportunities as a time to continue holding quality investments and to increase our holdings in selected stocks that we believe, over a five-year time frame, will continue to show stable financing and good earnings.

We have to learn to look beyond the short-term headline news – this is one of the core principles of investing. Experience has shown that the best investment results can come from taking a long-term view and not panicking when the news is bad or some crisis takes place.

Investment Adventures in Emerging Markets

Why I Did It and Why I’m Doing It Again

2009-11-26T02:37:00.000-08:00

Notes from Mark Mobius

To get the word out to investors who might want to venture into emerging markets.

John Templeton .. showed me that if you wanted to be successful, you need to keep an open mind and be willing to learn. He taught many others and me how to invest by pursuing undervalued stocks and looking globally.

I’m proud to achieve the status of a full-time nomad. I would rather see with my own eyes what’s happening in a company or country .. You have to observe and listen to the signals .. know the people who run the show.

Countries that make it easy for travelers to enter tend to be friendly to foreign investment.

Investment Adventures in Emerging Markets

The Next Investment Frontier

2009-11-25T20:04:00.000-08:00

Notes from Mark Mobius

Frontier markets, generally, have companies that are oriented towards their respective domestic economies rather than the global economy, so we believe that they have less correlation to emerging markets in general.

The level of risk is necessarily higher as compared to emerging markets. Frontier markets generally share the same political and economic issues as emerging markets, but their valuations may be more attractive as a result of this perception.

In summary, they are the next emerging markets and include the likes of Kazakhstan, Romania, Nigeria and Vietnam.

Investment Adventures in Emerging Markets

Mobius rejects open-ended funds

2009-11-23T16:39:00.000-08:00

* Story by: Nick Rice

* Magazine: InvestmentAdviser

Mark Mobius has faulted open-ended structures for causing underperformance, a year after his outspoken attack on the investment trust format.

Franklin Templeton’s veteran emerging markets manager said mistimed inflows and outflows in open-ended funds forced managers to sell when they would prefer to be buying and vice versa.

He said it was incorrect, for instance, to compare his underperforming Templeton Global Emerging Markets fund with his outperforming Templeton Emerging Markets investment trust (Temit), due to the different demands made in running the two vehicles.

“While open-ended funds must redeem money when clients demand it and accept money when clients want to invested, Temit as a closed-end fund is not subject to these flows of money,” he said.

“Unfortunately for open-ended funds there is a tendency for clients to withdraw money at the bottom of the market, when the managers would like to be purchasing more stocks, and then clients put more money into the fund when prices have moved higher.

“The open-ended funds are thus forced to sell at the worst time and purchase at the worst time. Closed-end funds have the luxury of not having those pressures.”

Mr Mobius said he had found it “impossible” to reweight positions within an open-ended buy-and-hold strategy to benefit from market rises and market falls.

Review of Mobius' Advice on investing

2009-11-17T02:53:00.000-08:00

An Investment Review of Dr Mobius' Advice by Cam Watson

Dr Mark Mobius is one of the most renowned fund managers in the world. The Templeton Emerging Markets Fund that he manages has risen 11-fold since its launch in the late 1980s. This equates to a return of over 12% a year.

In a recent interview with The Times Online in London Dr Mobius offered some advice for investors. As investment advisors ourselves, we thought it worthwhile taking a closer look at his advice. His first piece of advice was to keep an eye on value. It is no surprise to us that this was his first point. He is famous for his value approach. He looks for companies trading below their book value, or at a very low multiple of earnings.

He also advises people don't follow the herd. By this he is referring to the fact that markets often act irrationally. During good times they can become overly exuberant and during tough times they can fall well below fair value. It often pays to buy when others are selling, and sell when others are buying.

According to Mobius, investment is a long-term endeavour. "Rome was not built in a day and companies take time to grow to their full potential". It can be difficult to sit through a volatile market, and there are times when, if a company strikes life-threatening problems, selling is the best option. But generally, a longer-term approach helps smooth the short-term market ructions and is the best way to approach share investing.

One of the most important pieces of investment advice was to drip feed money into the market. The idea of buying - and 'selling' - in instalments is becoming much more talked about over recent years.

Nobody knows, including investment advisors, how markets will perform over the short term and it is incredibly important to drip feed into, and out of, markets. There is nothing worse that investing just prior to a sharp market decline. Investing in bites over a period of time is the best way to avoid mis-timing the market.

Mobius goes on to say that you should only invest in shares if you are comfortable with the risks involved. This is the most fundamental piece of advice of all. While shares do offer the highest potential returns, they also are a very volatile investment.

Although the average annual return from shares might be 9.5%, which is the average annual return they have delivered over the long term, it is a rare year when the return actually equals 9.5%.

It is more likely to range anywhere from plus 20% to minus 20%, with even more dramatic gains and losses possible from time to time. People not comfortable with this degree of volatility must include fixed income in their portfolio.

Just to prove that I'm not the only investment researcher who bats on about diversification, Mobius also counsels that a portfolio of stocks be diversified. There is no 'perfect' number of shares for a portfolio. Various studies have shown that having 15 stocks in a portfolio is enough to remove almost all stock specific risk from a portfolio. Many people prefer to hold many more shares than this in their portfolio. Ultimately, how many shares you include in your portfolio is a personal decision. But in general terms, when it comes to share investing, there is safety in numbers - more is better than less.

Mobius also recommends we don't listen to our neighbours when it comes to making investment decisions, nor should we believe everything we read in newspapers. The overriding message here appears to be that there is nothing more valuable than doing your own research on your investments and being comfortable with each and every investment you hold.

Given he manages emerging markets funds, it is perhaps unsurprising that Dr Mobius also recommends people invest in emerging markets. He believes developing countries, with their young populations will continue to grow at a faster clip than developed economies.

Cam Watson is the Chief Investment Officer for Craigs Investment Partners, one of New Zealand's largest independent investment firms. ...

Twitter / MarkMobius

2009-11-07T16:45:00.000-08:00

Take the emotion out of the equation. Look beyond headline news and focus on long-term fundamentals.

Update

2009-11-07T01:19:00.001-08:00

Twitter / MarkMobius

2009-11-06T16:44:00.000-08:00

Successful investing requires knowledge and experience. We believe our local perspective helps us make the right choices.

Twitter / MarkMobius

2009-11-05T16:39:00.000-08:00

Volatility is a characteristic of all markets. Changes can always be expected in all countries – developed or emerging.

Web Conference

2009-10-29T22:59:00.000-07:00

By Mark Mobius

Let me start with the overview on slide four. This gives you a picture of the growth differences between the emerging countries and developed countries.

The Gross Domestic Product (GDP) growth of emerging countries

continues to outpace that of the developed countries, and that is the reason why we are so excited about emerging markets as an investment category .. the difference is quite remarkable.

On slide five; you can see the yield spread between emerging market bonds and US treasuries.

When that spread comes down, that implies that people are willing to invest more in emerging market bonds at a lower interest rate, relative to US treasuries, and therefore are more bullish on emerging markets and so the emerging market stock index goes up.

You can see an inverse correlation between those two indicators; in 2008, we had a very bullish market, when the spread came down and the index went up dramatically, but then, with the sub-prime crisis, the opposite happened. Now we’re coming up again with the difference between US treasuries and emerging market bonds narrowing and that implies very good confidence in emerging markets.

Slide number six gives you a summary of the emerging markets since 1988, when we first started in emerging markets. During that period there have been three bear markets––in this case we define a bear market as a market that has declined more than 30%––and those were the:

• Asian financial crisis

• Tech bubble (the internet stock bubble)

• Recent subprime crisis

The important point I want to make is that these bear markets were fairly short-lived; they didn’t last very long. You can see those three bars are very short and that bull markets last longer. Given that, we always like to be invested, because we really don’t know when there’s going to be a bear market, and once you’re in it, it’s too late to jump out and probably not a good thing to do because it’s not going to last very long and then you’ll be in a situation of chasing the market up. So, we like to be fully invested as much as possible and are generally quite bullish because you’re better off being in than being out.

Templeton Emerging Markets Investment Trust PLC – Web Conference Transcript (29 October 2009)

Always corrections in a bull market

2009-09-28T14:25:00.000-07:00

Notes from Mark Mobius

"As you know, there are always corrections in a bull market. And the corrections can be very violent, and big... nobody knows when.

And if you think that you're gonna catch it, forget it, because these things move very, very fast."

The Money Game

The outlook for emerging markets

2009-09-11T23:30:00.000-07:00

Mark Mobius

Bull market:

There has been some excess in the rises that we have seen and therefore we can expect major corrections along the way. Nevertheless, we are in a bull market, which should continue for some time.

Internal growth:

Domestic consumption in emerging markets is rising rapidly and is gradually taking the place of exports

Crash:

The Bloomberg quote was a misquote regarding my predicting a 30% decline. Bloomberg corrected that mistake and confirmed that what I said was that there could be as much as a 20% correction in the markets, though that would be a correction in a continuing bull market.

Mobius emerging market indicator:

The spread between emerging markets bond interest rates and US treasury bond interest rates is a good leading indicator. If the spread widens then that means investors are losing confidence in emerging markets and equity prices will probably decline. If the spread narrows then it is a sign of higher confidence, which leads to higher equity prices.

Mobius on Gold:

Along with other commodities, gold will continue to do well and maintain its historically high price. This does not mean it will move up dramatically higher but the upward trend is clearly in place.

Ten top investment tips from Dr Mark Mobius

2009-08-29T12:58:00.000-07:00

Dr Mark Mobius is one of the most experienced fund managers in the industry.

He has been managing the Templeton Emerging Markets Investment Trust since its launch 20 years ago. In that time the value of an investment in the trust has multiplied more than eleven times.

Here Dr Mobius draws on his years of experience to offer ten investment tips to Money Central readers.

1. Keep an eye on value

Is a share selling for below its book value? What is the relationship between the earnings and the price?

2. Don’t follow the herd

Many of the most successful investors are contrarian investors. Buy when others are selling and sell when others are buying.

3. Be patient

Rome was not built in a day and companies take time to grow to their full potential.

4. Dripfeed your money into the market

No one knows exactly where markets are going so dripfeed your money into the market by making regular investments. That way you will average out the ups and downs of the market.

5. Examine your own situation and your appetite for risk

You should not go into equities if you are the type of person who is nervous every time you read a stock market report.

6. Diversify your portfolio

You must never put all your eggs in one basket unless you have a lot of time to watch that basket - and most of us don’t.

7. Don’t listen to your friends or neighbours when it comes to making investment decisions

Your own situation is different from everyone else’s so you should be making the decisions.

8. Don’t believe everything you read in newspapers, because things tend to be exaggerated

Don’t be swayed by headlines and look at what is going on behind the scenes.

9. Go into emerging markets because that is where the growth is

Emerging markets have consistently grown much faster than the developed countries in virtually every year since 1988.

10. Look at countries where populations are relatively young

Countries with young populations are going to be the most productive in future years.

Mobius market view

2009-08-21T22:37:00.000-07:00

Mark Mobius: The financial crisis was real in the banking system but not in the industrial economy. It impacted the economy because the banking system froze. However, markets are leading indicators and they are telling us the recovery is on the way now.

Chinese stocks have already gone up a lot and they will correct downwards but that will be temporary.

Inflation is good for equities but not for bonds because bond rates must go up. Depending on how fast the money supply brakes are applied then the impact on equities could be positive or negative.

Gold has probably already discounted a lot of inflation expectations but when hyperinflation hits then gold could move much higher.

Money supply has had fed the markets. Excess money supply begets inflation and that is what could go wrong but that is something we don't have to worry about for probably another year.

The Business Times

Mobius on Emergings (EMF) (MSF) (Temit)

2009-08-17T18:36:00.000-07:00

Originally I was looking for a way to get a stake in China. This was many years ago. Templeton’s China fund (TCH) was trading on the NYSE at that time.

It was clear that Mark Mobius was the man to watch for investing in China. I read all of his books and started to monitor his interviews on the web, like the one linked below from the BBC.

Because of his success, when John Templeton sold out to Ben Franklin, they used Mark Mobius more to attract new money, constantly all over the world, instead of his expertise in fund management. Our loss, but still the best we can do.

The motive of a mutual fund company is to make profits for the mutual fund, by pulling in new suckers. Whereas the closed-end funds at least in appearances is to make profits for the shareholders.

The China fund was small at that time. 30 maybe 50 million. Mobius had a regional fund called the “Dragon (TDF).” The dragon was huge, $250 million and not a China pure play, like the smaller portfolio.

Mobius created a listed Vietnam Fund in the 1980s, but once the money was raised he could not find any public companies to invest in. So they merged it with the smaller China fund and went open-end with it so that Vietnam Fund investors could get out without a discount.

The main idea Mobius pleads with us about is to give him the freedom to buy anything, anywhere that comes up.

Mobius is sitting in this interview explaining that if a person does not have a lot of time, they should be in a diversified global emerging markets fund. And the interviewer wants him to name specific companies.

Mark is explaining why you want to be spread out in all of the rapidly expanding economies, and the guy wants to know about specific countries. Mobius explains about the new frontier countries and how they are already in the broarder funds.

Mobius clearly states that the boarder funds have advantages over specialized funds. Diversified emerging market portfolio’s traded on an exchange have a long-term advantage, almost against anything else, in terms of profit potential and relative safety.

Sure we know that China is going to pop. But China will not blast off, on top in every year that we hold it. Emerging Market funds (Emf), and (Msf), can also hold positions in markets that will reign in the in-between years. Diversification spreads the risk of the fund being down when you need it.

I believe the word Mark used in his books and tapes was “special situations.” When something is about to happen, he jumps in there with a pile of money, takes a position, to make sure that it happens.

Then he goes back and splits the shares up among the funds that do not restrict ownership. It’s like censorship, don’t like it now, never will. Freedom of speech, freedom to spread wealth around.

The best ones go to Franklins private clients portfolios that cost millions to get in. I have seen these really blast off. They let people in those that have the power to put public funds, other people’s money, under Franklin’s management.

Closed-end funds were for the wealthy families before indexes came on the scene. They do not waste money on advertising or web sites. They do not accept new investors. The only way in, is to have your broker buy shares from shareholders getting out. You may get these at 10 to 20% below the asset value of your shares.

Imagine your ownership is spread across the fastest growing companies, in the fastest growing stock markets, in the fastest growing countries.

Good Karma really goes here, helping what use to be called the third world.

Mobius’s Emerging portfolio has Brazil with a larger position than China. India, Africa, Mexico, and Russia are all close behind. You need them all!

Government spending and increased confidence caused the first upward wave in share prices in 2009.

Wealth is shifting from the developed countries to the emerging and frontier economies, as it always has. How can it go the other way?

The rise will be orderly with dips of 20% below peaks expected in the uptrend.

This heads-up email gives you, and aware investors, plenty of time to “learn and be ready,” to shift a portion of current investments into, global worldwide diversified, emerging market index’s, or closed-end funds, whenever the market dips.

Mobius BBC interview, play it again:

Mobius on World index fund

2009-08-10T19:17:00.000-07:00

Mark Mobius in his recent interview compared the results of Emergings funds to the MSCI World index fund (uk:iwrd), a common benchmark for 'world' or 'global' stock funds. Mobius: “The MSCI World Index has climbed 54 percent from a 13-year low on March 9 as more than $2 trillion in government spending worldwide boosted demand.”

You can see on the above chart that the Emergings index (EEM) has out performed the World index by about 40% during this brief time. The World index includes a collection of stocks of all the developed markets in the world covering 23 countries, but excludes stocks from emerging economies.

Aug. 10 (Bloomberg) — Mark Mobius said global stocks will drop as much as 30 percent after advancing from multiyear lows and as companies increase share sales. “When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility,” the executive chairman of Templeton Asset Management Ltd. said in an interview in Kuala Lumpur today.

“Increases of 70 percent will be followed by decreases of 20 to 30 percent.” The MSCI World Index has climbed 54 percent from a 13-year low on March 9 as more than $2 trillion in government spending worldwide boosted demand. The rebound prompted a revival in share sales.

China State Construction Engineering Corp. and Visa Inc.’s Brazilian affiliate VisaNet raised about $11.9 billion in the world’s largest initial public offerings this year. The biggest risk for global stocks is the increase in initial share sales and bond issues, Mobius said today. Investors will be “selling to take up new stocks, that will impact the prices,” he said.

Mobius, who oversees about $25 billion, on July 29 said he plans to double Templeton Asset Management’s emerging-market assets within two years. The so-called correction “can happen anytime, probably this year,” Mobius said. “It may not be all at once, you may not see a decrease of 20 percent suddenly, it could be 10 percent here, and a rise of 5 percent then another 10 percent, you’ll see this kind of volatility in the markets.”

He added that he was referring to shares “globally.” This year’s rally has driven valuations of stocks on the MSCI World Index to 24 times earnings, more than double the 9.2 multiple on Nov. 20. China Shares China’s Shanghai Composite Index, the world’s best- performing major market, has surged 78 percent this year, as banks tripled new loans to 7.37 trillion Yuan in the first half to support a 4 trillion Yuan government stimulus package. “I don’t think it’s a bubble,” Mobius said. “I’m not worried about it,” as the government’s policies to rein in bank lending are a “good thing.”

Emerging market growth story

2009-07-10T08:33:00.000-07:00

Emerging market growth story
By Mark Mobius
Financial Times

Twenty years ago this month the Templeton Emerging Markets Investment Trust (TEMIT) was born. It has been a remarkable journey. At the beginning there were a handful of emerging markets (EMs) to choose from, now there are over 60 such economies. Given the current environment, I believe EMs will play a much greater role in the global economy. Countries such as China and India should emerge as leaders due to their relatively stronger macroeconomic and financial positions.

In the early days there was a buzz about EMs, but also scepticism and a lack of understanding (to a certain extent there still is). Then, there were many emerging countries but few open or large enough to invest in. There were strict foreign exchange controls and limitations on foreign investment, in addition to problems with safekeeping of securities and market liquidity.

Mobius on Russia

2009-04-12T05:25:00.000-07:00

Russian stocks still look cheap. Yes, they have risen dramatically from their low point but they are still a long way from their previous high. Of course, the PE has risen this year but Russian stocks, as represented by the MSCI Russia Index, are still trading at a single-digit PE of 6.8x as at end May 2009 - an increase from an even lower 3.4x as at end December 2008.

Russia and most other markets are in a much stronger position, financially and economically, than they were in 1998. Russia has built up strong foreign exchange reserves and trade surplus that have enabled it to withstand external shocks to its economy.

The Russian market was also affected by the correction in commodity prices due to its high exports of oil and other commodities, as opposed to any extraordinary fear focused on this market. However, we maintain the view that commodity prices will continue to increase in the long term due to greater demand from emerging markets and a relatively inelastic supply. This will thus benefit Russia in the future.

The most important lesson we've learnt from 1998 or any other crisis is that markets always recover - it's just a matter of time. Thus one should always maintain a long-term and patient view with regard to investing.

International Business Times

Investment trust industry may not survive without reform

2008-08-25T02:28:00.000-07:00

Story by: Nick Rice
Magazine: InvestmentAdviser

Mark Mobius, one of the UK's top investment trust managers, has said neither his trust nor the industry will survive without regulatory reform.

Dr Mobius, manager of the Templeton Emerging Markets investment trust, said hedge funds and other short-term speculators still had too large an influence over discounts.

According to Dr Mobius, this has created a wide discrepancy between the NAV of a trust and its share price, causing trusts to undertake involved and troublesome buybacks.

He said there were no pre-determined conditions under which the relevant parties might wind up the trust, but they would consider the option if the discount got too wide. He added this attitude might eventually apply to the industry as a whole.

"Unless there is some way funds are allowed to open and close in some way while still being closed-end vehicles, I don't see much of a future. The UK would have to change the investment trust laws and tax regulations."

He said the trust's buyback of 30 per cent of its shares in June had gone down as the most significant moment in the history of the fund since its inception in 1989. The board approved the buyback to narrow the discount on the fund in consultation with the major shareholders and the trust's advisers UBS and ING.

"The seminal event was the recent share buyback, which wiped out 30 per cent of the fund," he said. "It created a considerable amount of difficulties in that we had to raise a considerable amount of cash."

Dr Mobius said some major shareholders had reduced their holdings as a result of the buyback, although he said some sophisticated investors could retain their positions and use derivatives to manage their exposure.

Although he said the trust would undertake buybacks if the discount widened too far, Dr Mobius said investment trust managers currently had limited control of the trust's share price. But the share price rather than NAV was what mattered to investors, he said.

"The investors don't really care about NAV. We're looking at NAV because that's what we can influence."

Dr Mobius said the influence of short-term speculators was particularly mismatched with the objectives of the trust, which is a value-oriented, long-term, buy-and-hold vehicle in line with the Templeton investment philosophy.

Buy and hold strategy with low portfolio turnover

2007-02-05T00:51:00.000-08:00

Emerging markets
By Mark Mobius
Financial Times

When you have a very optimistic situation the bull market can continue for quite some time so it is dangerous to predict what will happen in the short term.

One thing is clear; bull markets always end in bear markets. However, the good news is that bull markets last longer than bear markets and bull markets go up in percentage terms more than bear markets go down.

We subscribe to a buy and hold strategy with low portfolio turnover. We sell when the stock reaches our sell limit determined by our team of analysts.