Invest Like the Best with Patrick O'Shaughnessy
Harvey Sawikin - Emerging Market Opportunities - [Invest Like the Best, EP.75]
· Summarized
Key takeaways
- Emerging markets offer substantial opportunities, but investors must navigate significant political and economic risks.
- Traveling to emerging markets is crucial for understanding local dynamics and identifying investment opportunities.
- Historical performance can mislead current evaluations; emerging markets offer both challenges and hidden opportunities.
- Investor behavior greatly affects returns; patience and strategic decision-making are vital for success.
- Focusing on local insights, and employing a fundamentally-driven investment process is key to outperforming in emerging markets.
Summary
Emerging Markets Overview
In this episode, Harvey Sawikin, co-founder of Firebird Management, shares his 24 years of experience with emerging market equities, particularly in Eastern Europe and Russia. He notes how emerging markets remain underexplored by many investors due to various geographical and cultural factors. He emphasizes the opportunity in these markets, often considered 'blind spots,' and discusses the potential that lies within them.
Investment Opportunities and Risks
Harvey discusses his unique approach to identifying investment opportunities in emerging markets, highlighting the need for hard work, discipline, and a bit of luck. He shares stories from his early days of investing in Russia, where he managed to find bargains through privatization vouchers. The conversation delves into the risks associated with these investments, as well as the complex political and economic landscapes that investors must navigate.
Market Comparison: Then and Now
A significant part of the discussion is dedicated to comparing today’s emerging markets to those of the past. While past investments were approached with high expectations of outsized returns, Harvey indicates that current valuations are more nuanced. He mentions that investors often overlook compelling opportunities due to political or economic instability in certain regions, underscoring the need for a thorough groundwork before investing.
Understanding Local Dynamics
Travel is emphasized as a critical component in understanding and investing in emerging markets. Harvey describes how visiting local markets and interacting with management teams can provide insights that financial statements alone cannot offer. He shares stories from various countries to illustrate how being on the ground leads to informed investment decisions.
Investor Psychology and Strategy
The episode also touches on investor behavior, particularly during volatile periods. Harvey notes that emerging market investors often make mistakes by buying at market peaks and selling during dips. He emphasizes the importance of a patient, long-term mindset and strategic approach in an environment that often appears chaotic.
Sponsors
- CFA Institute · The Global Association of Investment Professionals, whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals, working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The chartered financial analyst credential is the most respected and recognized investment management designation in the world.
- InvestorFieldGuide · For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
- Via · A ride-sharing service that utilizes a sophisticated algorithm to create efficient transportation options in urban areas.
- Education of Rick Green, Esquire · A book referenced in the discussion, illustrating interesting legal narratives.
Show notes
My guest this week is Harvey Sawikin, a co-founder and lead portfolio manager at Firebird Management, which manages funds dedicated to investing in emerging market equities. Emerging markets are often a blind spot for investors of all types: most of us have never traveled to the far east or eastern Europe, where many of the thousands of emerging market public equities operate.
I’ve been very lucky to travel quite a bit in Asia and the Middle East, but never to eastern Europe, which where Firebird focuses its investments. Harvey and I discuss his 24 years of experience evaluating emerging and frontier market countries, industries, and individual stocks. We discuss his experience buying privatization vouchers in Russia, banks in the Baltics, and how today’s emerging market opportunity set compares to the past.
Like so many of these conversations with investors who have earned significant excess returns, its clear investing opportunities in emerging markets are often disguised. Finding them requires risk, hard work, discipline, and a dose of luck and timing. Please enjoy my conversation with Harvey on Emerging Market Opportunities.
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
Follow Patrick on Twitter at @patrick_oshag
Links Referenced
Via
Books Referenced
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
Education of Rick Green, Esquire
Show Notes
2:26 – (First Question) – Most memorable travel experience since the beginning of Firebird
5:41 - How Harvey got interested in emerging markets investing, specifically, Eastern Europe and Russia
10:00 – How does the landscape for emerging markets today compare to when he first started
12:30 – What are the factors of an emerging market to look at and why do some not pan out
15:04 – Do countries have to meet minimum criteria before Harvey and his team will even start to do work on an emerging market
17:33 – How does Harvey distinguish between frontier and emerging markets
18:37 – Thoughts on the access points that regular investors have into emerging markets, such as ETF’s and Mutual Funds
23:48 – How does Harvey think about risk exposure when constructing a portfolio
25:56 – Looking at the bottom up part of the equation, what factors within a company or sector are considered as part of the investing decision
31:05 – Dividends in emerging markets
33:09 – How do US equities stack up as an investment against fixed income
34:53 - The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
36:52 - How do US equities stack up as an investment against emerging markets
39:38 – What type of investor allocate funds to emerging markets
42:37 – The value of travel in understanding emerging markets
50:19 – Biggest mistakes that emerging market investors make
54:49 – What in today’s markets has the smell of opportunity
55:53 – Harvey’s interest in Via
56:58 – Interest in buying gold coins
1:00:05 – If Harvey could only choose one country to visit, business or pleasure, where would he go
1:01:09 – Kindest thing anyone has done for Harvey
1:01:38 – Education of Rick Green, Esquire
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
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