Strandberg: Attractive Areas in Emerging Markets

This video is the second of three with Diana Strandberg. You can watch one and three here.

Andrew Daniels: In emerging markets you do have sizable exposure in both portfolios. Could you talk a little bit about what you like in emerging markets and perhaps highlight couple of companies that you are particularly very bullish on.

Diana Strandberg: We have 16 individual holdings that happen to be domiciled in emerging markets and they are really across an array of industries and locations. If we look at our overall roughly 25% emerging markets a good half of it is in tech, telecom, and media companies. Companies like Naspers in South Africa or Samsung in Korea for example. And then about another quarter to a third are in financials. So Itau in Brazil or Kasikorn in Thailand would be a case in point. I would say that what is in common of these holdings is they are in a portfolio on their own merits as we compare them globally to their industry peers. So Samsung would be an example of a company that is trading at the lowest or the second to lowest decile of valuation, depending on what metric you want to use globally. They dominate semiconductors with outsize profitably that's part of why we think the market is pricing them inexpensively because of concerns around the durability of that franchise. They dominate in displays with OLED that allows them to venture into foldable displays, for example, which could be quite exciting. They dominate in handsets.

Just to name a few of the areas in which they earn excellent returns on capital, good revenue growth, good cash flow growth. And they're returning that cash flow to shareholders. They have committed to return 50% of their free cash flow through dividends and repo to shareholders. So that would be an example of a company that we think is attractively valued, strong growing franchises with we think good capital allocation indicating an attention to creating shareholder value for the long-term owners.