Threadneedle Investments, UK equity team is finding attractive long-term opportunities in companies with significant exposure to emerging markets across Africa, Latin America and Asia.
Recently sold off by investors as a result of market volatility, UK listed companies operating in these parts of the world are now approaching attractive valuation levels, while companies with a UK focus look expensive, according to the managers. For investors with a long-term horizon, this trend is opening up interesting opportunities.
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Simon Brazier, head of UK Equities at Threadneedle Investments, said: "The improving UK economy has made investors more confident and company valuations are becoming arguably high in UK-focused sectors such as retail and house building. We have been taking profits from some of our investments in these sectors and are now looking to re-invest elsewhere.
"Many UK companies with exposure to the recently trouble demerging markets have been underperforming their domestically focused counterparts. As a result, they now present an interesting investment opportunity for investors with a long-term horizon such as pension funds. Businesses that have invested heavily in their emerging markets activity of ten have decades of growth ahead of them."
In particular, the team is looking at companies with exposure to powerful long-term consumption trends such as Diageo, Unilever, British American Tobacco, Aggreko and Inchcape-positions Threadneedle already owns in its institutional portfolios but has recently been adding to. The managers believe that a growing number of wealthier consumers in emerging markets will result in materially increased demand for the goods and services that these companies provide.
Simon Brazier concluded: "It is clear that emerging market volatility will remain a feature this year, with less accommodative US monetary policy playing a major part. Our research focuses on UK companies that can deliver long-term profit growth and has highlighted many with exposure to countries across Africa, Latin America and Asia. Businesses such as Unilever have been present in emerging markets for over 50 years and are well versed in navigating through volatility. There is no doubt in our mind that some high quality businesses with exposure to emerging markets present an interesting investment opportunity today."
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By GlobalDataThreadneedle’s UK Equity team is headed by Simon Brazier and manages approx. £17bn of assets on behalf of its clients, circa £9bn of which are invested on behalf of pension funds and insurance companies.
