Gartmore highlights value in emerging markets

Chris Palmer, Head of Global Emerging Markets at Gartmore, believes there is real value to be found in emerging market stocks. Speaking to an audience of investment professionals at Gartmore House in London on Wednesday, Chris acknowledged how far recent market-moving events have reshaped the investment landscape. However, he does not believe that they have affected long term investment potential within emerging market economies. "From our perspective," he said, "nothing much has changed with regard to the quality of assets or the earnings power of leading companies within the asset class."

However, as investors have become more cautious, indicators such as the forward price earnings ratio have fallen sharply. The ratio attempts to capture how much investors are prepared to pay for the projected profits. At benchmark level, valuations have slipped below the level reached when Iraq invaded Kuwait in the 1990 Gulf War. According to Chris, this could mark an interesting entry point for investors seeking to gain exposure to economies still showing greater momentum than many mature markets.

He also acknowledges that today's operating environment is far more challenging than in the recent past. As a result, his investment strategy has been to shift to more defensive positioning. "We are taking a more conservative stance, favouring companies with attractive cashflows, modest growth plans, and relatively low debt burdens. Cyclicality is being replaced with ‘predictability' across all our portfolios and analysts are being guided towards those companies that have demonstrated an ability to prosper in tough times in the past."

Research is focused on companies with a strong, transparent earnings and low beta i.e. low sensitivity to market returns. Gartmore is currently investigating opportunities in utilities, consumer staples, telecommunications and well-capitalised, conservatively managed financials.

Chris Palmer is a CFA Charterholder, and has US$6.4 bn under management. In the year to August 2008, Chris's SICAV Latin America Fund ranked in the top decile relative to its peers.