Overview
JMG : JPMorgan Emerging Manager mulls what makes a good investor
JPMorgan Emerging Markets annual results for the year ended 30 June 2014 show the fund delivering a net asset return of -3.5%, behind the MSCI Emerging Markets Index which returned +1.4%. The return to shareholders was a bit better (-1.0%) as the discount narrowed over the year. The board are proposing to maintain the dividend at 5.5p despite a fall in revenue for the period.
The manager says asset allocation was positive overall but stock selection was a negative during the period. Indian IT company, Tata Consultancy, was the biggest positive contributor to the fund’s performance – it was a beneficiary of the weak Rupee as its customers are largely outside India. Adverse currency moves affected the value of a number of stocks in the portfolio and the manager highlights Shoprite in South Africa, Garanti, a Turkish bank, Unilever Indonesia, and United Breweries, India’s largest brewer as companies that fell as a consequence of weak domestic currencies.
After 20 years of managing the fund, Austin Forey offers the following advice to investors
” Keep it simple: the financial world is in love with complexity, yet in the end it all boils down to two questions: will I lose money? will I make money? Everything else is just a subordinate clause in the attempt to reach an answer.
Be very wary of high levels of debt; just as cash provides you with choices, debt removes your freedom to act; in the long run, that is often fatal.
Do not be fooled by inflation: it is not worth anything. Inflation eases life for businesses and flatters their managers, but one should always try to look through the numbers to take out the effects of inflation, especially in businesses whose assets are replaced on long time cycles.
Understand why companies make money: otherwise you can’t understand why they will cease to do so.
Think about the future, not the past; this is difficult, because it involves uncertainty not facts. Use your imagination, but do not let it run away with you.
Conviction is rare, and therefore very valuable. I should always ask myself: what do I know? and be honest enough to know when I am guessing instead.
Perhaps most of all, people make the difference. The longer time horizon one has, the more this is true; most of the time, when I meet companies, I want to form an impression of the people who run them. When we find a combination of good people in a fundamentally sound business, we want to own it for as long as possible.
Finally, think about businesses, not macroeconomics, and about what you would like to find, rather than what you see right in front of you. The index only tells you about the past, while one only has to look at China to understand that economic growth does not necessarily mean that you can make money in the stock market.”