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Portfolio Manager Defies Trend, Identifies Undervalued Market with Great Potential

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Portfolio Manager Cautious on India, Bullish on Undervalued South Korean Market

Portfolio manager Kamil Dimmich from North of South Capital is taking a cautious stance on India's growth prospects, despite the optimism of many investors and big-name banks. Dimmich believes that India's current valuations are extreme, even considering its historical premium compared to other emerging markets. While India has recently experienced stellar economic growth, with GDP rising by 7.8% in the June quarter, Dimmich is waiting for a better opportunity due to the already high valuations.

Waiting for a Better Opportunity

Dimmich, who manages the $1.5 billion Pacific North of South Emerging Market All Cap Equity fund, explains that paying for current growth may not yield profitable returns. He emphasizes the need for companies to grow into their already high valuations. Despite India's projected rise to become the third-largest economy by 2030, with a projected GDP of $7.3 trillion, Dimmich remains cautious and waits for a more favorable entry point.

Finding Undervalued Stocks in Emerging Markets

Dimmich's investment strategy focuses on identifying undervalued stocks with strong cashflows. He seeks out great companies that are not correctly reflected in the market. One market that Dimmich is particularly bullish on is South Korea, which he considers a "great value market." His top holdings include petrochemicals player LG Chem and bank KB Financial Group. Dimmich acknowledges the Korean market's historically low valuations, driven by skepticism due to unproductive investments made by companies with high profit margins. Dimmich believes that despite these concerns, the Korean market offers significant potential for investors. He sees "crazy discounts" where valuations are disconnected from reality. While some investors may have reservations about the persistence of these issues, Dimmich advises taking a patient and long-term approach. He believes that having such opportunities in a portfolio can lead to incredible performance in the future. In summary, while Dimmich remains cautious about India's current valuations, he sees potential in the undervalued South Korean market. His investment strategy focuses on identifying great companies with strong cashflows that are not accurately reflected in the market. By patiently waiting for the right opportunities, Dimmich aims to achieve long-term success in emerging markets.

Investment Strategy Insights: A Cautious Stance on India and a Bullish Outlook on South Korea

Kamil Dimmich, a portfolio manager from North of South Capital, is demonstrating a cautious approach towards India's growth prospects, despite the country's recent economic surge. His stance offers a unique perspective for new business formations, highlighting the importance of not being swayed by general market sentiment and instead focusing on valuations and growth potential.

Assessing Market Valuations

Dimmich's cautious approach to India, despite its projected rise to become the third-largest economy by 2030, underscores the importance of assessing market valuations. His approach serves as a reminder for new businesses to not just focus on growth prospects but to also consider the cost of entering a market. High valuations can potentially limit profitable returns, making it crucial to wait for a more favorable entry point.

Identifying Undervalued Markets

In contrast to his cautious stance on India, Dimmich is bullish on the South Korean market. His strategy of identifying undervalued stocks with strong cash flows in this market provides a valuable lesson for new businesses. It emphasizes the importance of thorough market research and the identification of undervalued opportunities, even in markets that may be overlooked by others.
Long-term Approach and Patience
Dimmich's advice of taking a patient and long-term approach, particularly in markets with "crazy discounts," is a crucial lesson for new businesses. It underscores the importance of patience and long-term thinking in business strategy, even when facing market skepticism. In essence, Dimmich's investment strategy offers valuable insights for new business formations. His cautious approach to high valuations, focus on undervalued markets, and emphasis on long-term thinking serve as important guidelines for new businesses navigating their market entry and growth strategies.
Story First Published at: https://www.cnbc.com/2023/09/27/forget-india-fund-manager-says-another-emerging-market-em-offers-great-value.html
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