Are you guilty of herd investing? Always buying at the top and crystalising losses when a market bottoms out? Perhaps you need to be more contrarian.
These brave bottom-fishers look for unloved markets and stocks that have fallen out of favour in the hope that they will benefit from the rebound. That is not to say that all assets that have fallen in value will necessarily return to the previous highs. Some stocks and stock markets lose value for fundamental reasons – retail stocks Blockbuster and Woolworths for example, who fell victim to the rise of e-commerce.
One of the free tools on Morningstar.co.uk allows you to rank indices by market performance, revealing the best and worst performers year to date, as well as over one, three and five years.
Russia has lost 19% so far this year, and is the worst performing index. This may make it attractive to contrarian investors – looking to make brave bets in the hope for future returns. If you believe in the fundamentals of the Russian market and are looking to add country specific exposure to your already well diversified portfolio, you could consider the funds below.
Baring Russia
This Bronze Rated fund is run by Michael Levy. Levy uses the teamwide GARP-based approach, focusing on attractively valued stocks with earnings surprise potential. While the approach is predominantly bottom-up, top-down considerations are incorporated into the research.
The team scores companies on growth, liquidity, currency, management and valuation. The strategy has tended to lead the fund toward significant sector and stock bets. For example, governance concerns and uncertain regulatory backdrops have generally led to underweights in utilities and telecoms.
Neptune Russia & Greater Russia
Morningstar analysts think this fund is a strong choice within its category and have awarded it a Bronze Rating. This fund features a seasoned manager with a wealth of experience in Russian equities. Indeed, almost half of Robin Geffen’s 30 years’ experience is in Russian equities.
There is a strong adherence to Neptune’s firmwide process here, where the portfolio is constructed from the global sector work carried out by the analysts. Fund analysts find this an appealing feature of the process, and think positively of the research output the team produces. That said, the portfolio also highlights Geffen’s views on Russia and typically looks at the economy through a 360-degree lens as he believes it is important to understand the short- and longer-term drivers for Russia.
Parvest Equity Russia
Thanks to the experienced team and thorough process, Morningstar fund analysts have a positive opinion of this fund and have awarded it a Bronze Rating.
Although many Russia funds ended 2013 with a loss, Parvest Equity Russia appears to be one of the few funds set to close the year with a gain, albeit a small one. The managers are continuing the path taken previously by seeking out equities that are able to combine above-average growth with a high dividend yield. Companies in which the state plays a major role are avoided or limited as much as possible and for certain themes preference is given to smaller off-benchmark names.
