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10 comments:
Morning, Roger. I have a chicken and egg question--do you begin your analysis with a country that you want to invest in, or with a portfolio need (eg, ag stocks) and then identify the best country to fill that need? Hope that's clear.
Thanks much. Happy summer.
probably country first more often than not.
From the perspective of emphasizing country exposure, and getting the country exposure "right", and getting the right proxy for the country, I guess I missing the point over all the deliberation over what individual stock to use. If it is country that is most important, then why not just go with the country ETF, get diversified exposure to that country and call it a day. Looks like Ishares has a pretty broad menu of country ETFs to choose from.
better dividend yield (assuming a dividend paying stock), easier management of sector weightings, easier manangment of avg cap size and perhaps avoidance of a sector; example I prefer no financial exposure for China
Roger,
What do you use as a metric to determine your "fit" with the country?
If Yarra is not as good a proxy for Norway as Statoil, what (objectively) tells you that? Correlation with an equal weighted (price or capitalization?) index of all the countries equities?
I think I get your point and don't disagree, but I was/am stumbling over the Justice Potter element of porn analysis ("I know it when I see it").
Also, when you are, from the top down, considering what needs you are trying to fill (country exposure), how do you know that you are not responding to the "high fliers" that are being marketed from a particular country? The Brazilian stock market may have been up drastically, but if much of that gain was (don't ask me how to "know" this) due to commodities producers/processors, then is the need to have "Brazilian" exposure, or to increase exposure to commodity producers/processors? This effectively restates the prior comment: do you decompose the country that you are "attracted" to in order to know that your attraction truly is to the country (viz., the local-currency denominated equity exposure) and not to a subset of the country that may be synthetically reproduced with (more local) exposure?
Don't mean to be difficult, I just think you got me thinking...
R
Roger,
I read your blog a lot and enjoy it very much. The comments today have hinted at a basic question I have regarding your investing philosophy.
Why is it more important to diversify your investments by country first rather than by sectors and industries? You seem to be saying it is more important to have some exposure to Peru or Iceland, as examples you have discussed, than to invest in industries that play into world shortages or world demographics.
This is the missing link for me to understand how you approach portfolio diversification.
Rick, although I've never articulated it that way there is a Justice Potter aspect to it; heavy index weight, big company in the industry the country is known for, high correlation to the index.
sticking with Brazil it is a good way to capture resource exposure, a different type of economy (commodity versus service), it is a fast growing economy. I know I want Brazil, I know it makes sense to add brazil in the materials sector and i think it makes sense (and has made sense for the last few years) to add volatility in this sort of segment because it is working as opposed to adding volatility in something that has not been working--like financials.
I think i have probably done a bad job at articulating this because i come to all of those things about brazil at the same time.
i know that to suit my idea of diversified i need to include different types of countries than what the US is and brazil fits than bill.
Bill the context of country as mentioned above in the 6:03 comment was country versus theme.
i do think of sector weights versus SPX first. I mentioned that I may be adding China back in soon and that I am considering between three stocks. before i buy a stock i need to decide whether i am willing to increase my existing sector weight or if i need to sell something to make room.
Roger, I take it from your video that although you still like Brazil you don't want to be too heavy there when it goes off the boil, and so you're looking to skim some profits off of the top and put them to work in China, which has had a fairly bad time of it and some stocks are looking oversold. Obviously there's the rising tide analogy but if the tide continues to go out those stocks will eventually be recognized for their true worth (left high and dry?) and you'd have been proved correct in your stock-picking?
well i don't think i make big bets anywhere, brazil included. throughout all of this I have had one stock as an across the board holding, that's it.
if a stock is doing lousy but the portfolio is doing what I hope then I don't really care about the stock. if the portfolio is doing what it is supposed to then the client will be able to better cope.
I own BAC, it is down a lot so i appear to be wrong. having less exposure than the market and selling BCS in December make owning BAC now far less problematic.
Thanks Roger, that makes a lot of sense - not unusual on here but it really stands out on the interwebs.
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