12: Pzena's Allison Fisch - Value Investing and Emerging Markets

[i3] Institutional Investment Podcast

MarketFox columnist Daniel Grioli speaks with Allison Fisch, a Portfolio Manager and Senior Analyst at Pzena Investment Management, about how you can apply a value strategy in emerging markets. Is it possible in the first place? Fisch believes so, but some adjustments are necessary to make it successful. Overview: 4:00 – Value investing is really all about psychology, the psychology of markets. 8:00 – Can you use value strategies in emerging markets? Yes, but with some differences. 11:00 – Country selection hasn’t mattered buch in developed markets, but in emerging markets it does 13:00 – Using quant tools to screen the universe. 15:30 – You are looking for companies that are sick and you want to know whether they are having a cold or whether they are terminal 16:00 The sweet spot is where there is something bad going on in a company, but they have the ability to recover from it. 17:00 – We look at the 20 per cent cheapest companies. 21:00 – We are in the worst cycle for value strategies. Is there something broken? 22:00 – The bigger the high, the worse the hangover. 25:00 – How do you deal with technology stocks in a value strategy? 29:30 – The biggest change in emerging markets in the last 10 years is the make-up of the market 32:00 – State-owned enterprises are trading at a discount. How do you get comfortable with these companies? 34:30 – Disruption and value strategies, do they mix? And the ‘Death by Amazon’ index. 35:30 – In emerging markets you don’t have incumbents, so it is just the disruptors getting more expensive. 38:00 – Today’s environment is like a bathtub; which company gets flushed down the drain? 41:30 – The moat of brand is not what it used to be.