Top Emerging Value Opportunities

by | Sep 7, 2001 | Archives

Here are some ways to tap into top value markets.

A recent article in “Business Week Online” agreed with our recent comments that uncertainty in the U.S. economy has started investors looking overseas. The article explained that Paul Blankenhagen, portfolio manager for the Principal International Fund(PRWLX ), points out that the consensus GDP growth estimate for Europe is 2.5% annually. Blakenship is a value investor (see link to article about Jeremy Grantham) and sees better value in Europe because the expected growth for the U.S. GDP is only 1.6%.

Blakenship does not expect Europe's leading indicator to bottom out until the second half of the year. Sinceequity markets usually lead the economy by three to six months he expects Europe to be a place to put investment dollars in.

The article also suggests that the U.S. dollar is overvalued since the euro, which is now worth just 88.50 cents is down 24.5% since the new currency started in 1999.

The article explains “Blankenhagen likes the Continent's media stocks. A value investor, he expects to see an eventualturnaround in the advertising climate in the U.S. and globally. “Companies have cut back on a lot ofdifferent areas to reduce their cost base as the economy has slowed,” he says. “As the economybottoms and begins to pick up again — most likely next year some time — these companies will beginto spend again on advertising, and we're already seeing signs of some companies doing that.” One ofhis favorite stocks is Granada, a British television broadcaster that should get a big boost from anyuptick in ad placements.

The article also shows several ways to enter the Korean equity market which is rated by Michael Keppler as one of the best value emerging markets at this time.

It outlines the Matthews Korea fund (MAKOX), which is up some 28.15% year todate, and Fidelity Advisor Korea A (FAKAX), which has gained some 8.62%.

Here is an excerpt about Korea from that article. “Korea remains one of the more significant restructuring stories in Asia, experts say. Until recently, the nation's chaebols — large conglomerates backed by the government — dominated the economy inKorea. But the Asian crisis is changing that. Like a lot of Asian companies, chaebols had a significantamount of debt in U.S. dollars, so when the Korean won plunged 30% to 40% in a matter of weeks, itpushed them to bankruptcy. When the government bailed out the banks, the bureaucrats foundthemselves in charge of the chaebols and forced much restructuring and dismantling of the weakercompanies to keep the healthier ones going.

Now, Korean companies are turning around but have yet to see huge share price gains. “Ina nutshell, they're dirt cheap,” says Mark Headley, manager of several Asian funds for MatthewsInternational Funds. “There's still a discount on Korea relative to almost any other corporate equity inthe world, just because of the distrust for management that lingers.”

Headley's favorite stocks in Korea include Hana Bank. Trading a little over four times 2001 earnings,he considers the stock undervalued for one of the area's better banks. Another is Hite Brewery, whichhe says is also cheap, trading at about nine times 2001 earnings projections. “It's been aggressivelymarketing and has very successfully been building market share and is now the dominant brewer inKorea.”

For more goto

You can get more information on the funds above from Larry Grossman at Sovereign Asset Management

Until next message good global business and investing!