(Bloomberg) -- Here’s one way to outperform peers as concern about everything from a trade war to a shooting war ricochet around the world: Buy stocks that are least vulnerable to politics or protectionism.
“Our view is that politics are source of risks, not sources of alpha,” said Kim Catechis, 56, whose Global Emerging Markets Fund beat 98 percent of similar funds during the past 12 months and 99 percent over three years. “I am not playing this trade game.”
That explains why Catechis, who oversees $2.3 billion in emerging-market stocks at Martin Currie in Edinburgh, favors financial companies such as Peruvian lender Credicorp Ltd., technology firm such as Tencent Holdings Ltd. and utilities like China Gas Holdings Ltd. The Zimbabwe-born fund manager prefers names that can deliver in three to five years.
Catechis, a two-decade emerging-markets veteran who got his start 31 years ago, said in a telephone interview that he has a bottom-up approach on stock-picking and prefers to view the emerging world by industries, not countries. He holds fewer than 50 stocks in his emerging-market funds. More than 60 percent beat the benchmark in the past year, mostly thanks to gains by financial and technology companies.
In the meantime, he doesn’t expect the trade-war bombast to hurt his portfolio -- especially because the chance of an actual back-and-forth breaking out remain slim.
“These trade wars don’t actually develop in terms as quickly as they appear in news headlines,” Catechis said. “My base case is that there will be an escalation in tensions, but only verbal.”
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