The unsung heroes of Qiao Ma’s portfolio
It wasn’t that long ago that investing in Asia was a foreign concept to most investors. More recently, the rise of national champions like Alibaba, Tencent and Samsung has changed that perception. The success of these behemoths now has investors hunting for the ‘next big thing’. What we see among such special firms is their “demarcation between best in class companies with their own industry and their own countries.”
Qiao Ma, Portfolio Manager at Cooper Investors, says she is genuinely excited about the value on offer from stocks in her Asian equities portfolio but says that’s not because she has found the next Alibaba or Tencent. Cooper Investors has a unique way of thinking about value that focuses heavily on the quality of management and the culture they create. This ‘value latency’ framework helps them see opportunities that don’t necessarily reside on a balance sheet or in some financial model.
With a long term, low turnover oriented portfolio, Qiao contends that focusing on forward figures based solely on historical financial information is incredibly limiting and fails to capture the intangible qualities of firms with the most potential for success. These “best in class” stocks know how to stand out irrespective of industry, driving new revenue streams and service offerings that enable them to far surpass previously mapped trajectories.
“If I show you a Tencent income statement in 99 versus an income statement in 2002, 2005, 2008 and now 2010 and 2018, you’re going to think these are 5 completely different companies that have nothing to do with each other, even the revenue labels have changed… All these massive changes within the company, you simply cannot capture if you just look at simple historical financials”
These sentiments ring true even within a Covid-19 backdrop. Using the example of Shenzhou Intl Group Holdings Ltd, a “vertically integrated knitwear manufacturer”, Qiao demonstrates that proper planning and management drive can allow firms with the right processes to grab extra market share for the long term and flourish far into the future.
In this extended interview, Qiao explains how she applies this approach to uncover great stocks in overlooked industries and why the next big thing may already be one of the mega-cap companies dominating their industry.
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