Banks around the world are seeing significant profit growth after a decade in the doldrums. Today, they are growing earnings and are returning capital to shareholders as a result of real balance-sheet strength. They also remain out-of-favor with most investors. That’s the kind of combination we like, and we continue to hold a number of the most attractive banks.
Elsewhere in Europe, we have seen a number of German industrial businesses come onto our screen in the second half of the year. With Germany’s reliance on Russian energy, wider economic uncertainty, lower forecast order numbers, and supply-chain squeezes, its industrial sector has seen larger share price falls than elsewhere.
Nonetheless, we can still find businesses with structurally growing end markets that have delivered high single-digit revenue growth every year for a decade, have well-capitalized balance sheets, and still trade at a wide discount to our estimates of fair value.
3. Emerging Markets: “China, China, China”
Regulatory crackdowns, political worries, a property-market crash, extended zero-COVID-19 policy, and weakening GDP data led many investors to flee mainland companies in China. This caused the Chinese stock market to fall far from the heights reached in 2019/2020. The market fell far enough that our valuation screen has been throwing up an abundance of Chinese businesses across a broad range of industries for our emerging-markets value portfolio managers to examine.
Outside of China, financials are also screening as attractively valued, notably in Kenya and Argentina..
4. Global: Chinese, US, and Japanese Cyclicals, US Technology
China has also been a key area of research focus for our global value portfolio managers.
Elsewhere, a number of US and Japanese cyclicals are beginning to flash on our screen because they look very cheap, especially in the memory and semiconductor space.