Every December I am fortunate enough to be asked to participate in various roundtable (ish) panels. The way they work is that a word document goes out and we are asked weigh in on a multitude of topics. One of them is due in a couple of days so I thought I would answer one of the questions for today's blog post.
Where are the real growth stories overseas right now?
I would turn this one around a little bit based on the current reality of the investment world. Before figuring out the "growth stories overseas" it is crucial to understand which countries are facing systemic threats that far exceed the threats posed by normal economic and stock market cycles.
For example, the Bovespa is down 15% YTD as of this writing, up from what was a 25% decline. In looking at the totality of the story it is clear that the country is not wading through different forms of desperate and unprecedented action to try to restore something (growth, jobs, housing market, etc). Brazil has had ups and downs and of course that will continue but the nature of the threats are nowhere near what they are in the US, Europe and Japan, not even remotely similar.
We look out longer than one year in building an investment thesis. Part of the country selection process we prefer is, among other things, owning countries where there is a middle class ascendance. The idea here is that the demand for access to (relative) middle class lifestyles is very consistent. This means electricity, potable water, cable TV, telephones (probably wireless), better roads, cars, higher quality personal goods and so on--in short, their perception of an American lifestyle.
The demand is a one way trade but of course the stocks will not be. The demand does create a long term tailwind that is a valid investment thesis. Although not the only form of country selection we use, this is one, and countries we like and own in this context are Brazil, Chile, Colombia and China (by virtue of China's weight in two thematic ETFs).
The process for possibly adding more countries in this context is ongoing. I've written many times on my blog about learning about countries and following them for quite a while before buying in; this was the case with Colombia and will be the case with other countries we add in to the portfolio in the future.