Jeffrey Towson – on becoming a Global Value Investor

Tuesday, Oct 11 2011 by
Jeffrey Towson  on becoming a Global Value Investor

Until 2009, Jeffrey Towson was Head of Direct Investments Middle East/North Africa and Asia Pacific for Prince Waleed arguably the world's no.2 investor and nicknamed by Time magazine as the "Arabian Warren Buffett". While many investors are advised to have some emerging markets coverage in their stocks and share portfolios via various investment funds and ETF’s, global value investor Jeffrey Towson instead suggest that successfully going global as a value investor requires successfully going direct.

He believes “going global” as a value investor means exponentially increasing your potential opportunities. However, experienced investors are finding themselves on rapidly changing and increasingly unfamiliar terrain.Issues like: when sitting in New York or London, can you really go long in China? Isn’t getting accurate information a problem?  Isn’t the absence of rule-of-law in many places a problem? What about the fact that there is often no real separation between commercial and government activities?

Most private investors with global ambitions look at China, India, Brazil, Russia and other places and are rightly cautious. Some investors decide to avoid the perceived risks by avoiding these markets altogether. Or they limit themselves to short-term and liquid strategies. Or they try to invest in an indirect way, such as buying an international retailer such as Tesco’s with significant exposure to the emerging markets.

Going direct - five common “going global problems”

Jeffrey Towson formulates five problems aspiring global value investors need to overcome when considering going global, including:

Problem 1: Limited access to investments.

Towson suggest following Buffett’s most important lesson: that you accumulate wealth by targeting the most mispriced assets and going long. Market inefficiencies are your best targets while time is your best ally.

Most of the really mis-priced assets in developing economies are private however. And these tend to be fairly tightly held – often by conglomerates, state-owned-enterprises and owner-managers.  Even Warren Buffett was denied in his request to buy 25% of Shenzhen-based BYD (he ultimately got 10%). Getting access  is a primary problem when going global.

Problem 2: Increased uncertainty in the current intrinsic value

Most developing economies are characterised by increased uncertainties and instabilities. The markets and companies are developing quickly. Government actors are changing the rules or disappear overnight altogether. Information is limited and inaccurate. This all plays out in a greater uncertainty  when calculating intrinsic value.

Problem 3: Increased long-term uncertainty, including worries about instability

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The previous problem becomes even larger over the long-term. Five years in emerging countries is a very long time in terms of new regulations. It is hard to invest long-term if the future intrinsic value of your investment can change significantly. Long-term uncertainties (including long-tail risk) are a big problem and focusing on companies with a sustainable competitive advantage (i.e., Buffett’s approach) is usually not enough.

Problem 4: The availability of only weak or impractical claims against the target enterprise

Board seats and contracts can mean little in many of today’s rising markets. Minority shareholder rights even less. Keeping a strong claim to your asset over the long-term is a critical challenge.

Problem 5: Foreigner disadvantages

This is the catch-all for the various challenges you face when entering a market as a foreigner. You often have less information. The rules can be written against you. There are language and cultural gaps. You are often far away. And so on. All these, and many more, manifest themselves as disadvantages when investing direct in local companies.

According to Towson, if you can overcome these problems you can start your hunt for value investments virtually anywhere.  You will find, as Towson has, that most of the world outside the developed markets is wildly mispriced today.

Alternatively, you can buy publicly-traded multinationals with extensive emerging market operations. Buying an American or European company, in say retail or natural resources, with operations in China or India takes care of problems 1 and 4. 

This approach also addresses problem 5 (foreigner disadvantages), which can be significant in many places (Russia and China being the most serious). A UK-based investor buying into an AIM-listed Chinese company is at the minimum going to have some information disadvantages relative to local Chinese investors. But a UK-based investor buying a UK multinational has no such disadvantage.

For an extensive interview about Jeffrey Towson's global value investing philosophy click here:

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Tesco PLC is a retail company. The Company has retail operations across the United Kingdom, Asia and Europe. The Company engages in banking operations, through Tesco Bank. Tesco Bank’s banking products include customer accounts for credit cards, loans, mortgages and savings. The Company offers a range of 4,000 own brand products, as of December 22, 2014. The Company operates through four segments: the United Kingdom, Asia, Europe and Tesco Bank. The Company operates approximately 3,378 stores in the United Kingdom. The Company operates approximately 2,417 stores in Asia. It operates approximately 1,510 stores in Europe. Tesco Bank offers retail banking and insurance services in the United Kingdom. more »

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4 Comments on this Article show/hide all

Fangorn 29th Nov '11 2 of 4

Indeed, the conundrum of which funds to choose. I'd personally avoid Russia ( Long standing BP shareholder) so despite the obvious attractions they're a nightmare to deal with,which, coupled with their lack of trustworthiness makes me reluctant to invest full stop.

My favourites:

JPM Brazil, JPM China, Fidelity China)Shocking perforamce), JPM Indian

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Steven Dotsch 30th Nov '11 3 of 4

Hi Fangorn

Personally, I have been exited funds for ages focussing instead, as you know, primarily on dividend income shares. However, I also ran a more 'speculative' (non-dividend paying) undervalued shares portfolio.

With regards to Russia, I gather Aurora Russia (LON:AURR), at while not a fund, but instead a development capital outfit, with several near (2012?) exit candidates, fits that undervalue bill.


Steven Dotsch - Dividend Income

Book: Guide to Dividend Investing
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Fangorn 30th Nov '11 4 of 4

Interesting, will take a look next week when I'm back at home - popping in now and again whilst enconced in Devon.

Main funds I currently have focusing on the dividend front are BRCI, Invesco Perp High Income, Newton High Income. But like yourself I mainly look for undervalued shafres yielding 5% plus.

Thanks for the research suggestion

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About Steven Dotsch

Steven Dotsch


Steven is the editor of Dividend Income and publisher of the Guide to Dividend Investing. Dividend Income provide savers, investors and (future) retirees with concise information when dividend paying shares are historically under- or overvalued. Dividend Income's investment strategy is aimed at maximising total returns by providing timely information to subscribers on when a dividend paying company is historically undervalued. Focus is on sound stock selection and the ability to recognise value using dividend yields in order to identify undervalued and overvalued shares. As part of the Dividend Income premium content offering, subscribers have exclusive access to Dividend Value Profiles of companies whose share prices are historically undervalued, as well as occassional Dividend Income Reports. and DII Snapshots. The latter are mini reports based on exactly the same valuation methodology used for our Dividend Value Profiles and Dividend Income Reports with concise information whether a dividend paying company is currently historically undervalued, overvalued, or, somewhere in between. We have also put more than £75,000 of our own money behind our dividend income investment strategy creating the Dividend Income Portfolio which over time will invest in up to 30 dividend paying companies in order to create a diversified and increasing stream of tax-free dividend income. Steven Dotsch said "In the current climate of low interest rates, increasing inflation, and huge budget deficits now more than ever individuals need to take responsibility of their finances in making sure that they can afford to retire when they want to. By empowering individuals with the right information on how to build a portfolio of high quality dividend paying companies which consistently increase their dividends they can safeguard their futures.” Steven Dotsch - Managing editor - - For an example Dividend Value Profile click: more »

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