Justin Leverenz, whose developing market fund is one of the best performers in its class over the past five and ten years, says he thinks a number of inaccurate views are leading investors to stay away from emerging markets.
In a recent interview with Morningstar, Leverenz cited “misnomers about China, that China is going to have something like a hard landing or a financial crisis” as one storyline he disagrees with. Another misnomer, he says, “is associated with this idea about global liquidity ebbing, in which case many emerging markets are fragile. Somebody coined this idea of the Fragile Five, and I think it’s complete misnomer. The world has structurally changed.”
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“The way I think about emerging markets is we’ve gone through a major cyclical deceleration in the last two years,” Leverenz says. “We’re going to start to see a recovery in the large economies: India, Brazil, and Mexico. Second, I think China is unbelievably durable and will be the greatest growth story for the next decade just as it has been for the last. And third, now we’ve got some appropriate prices. So, I think it’s a good backdrop for emerging-market equities.”
Leverenz talks in more detail about China, where he’s finding lots of opportunities because of what he sees as overwrought pessimism. And he explains how controversy allows him to buy shares of very strong firms on the cheap, which is the case in Russia right now.
Currently, Validea.com has a number of highly rated emerging market stocks, including Sohu.com (SOHU) and Telefonica Brasil SA (VIV), both of which were upgraded today.