InsightsWhy We Do Not Invest Directly in Emerging Markets

Investors have often asked us why we don’t invest directly in emerging markets, some of which experience higher GDP growth than North America, and why we don’t focus solely on small company stocks (where the conventional perception of value lies).

To this, we always simply answer that our focus is North America, where we have a good understanding of value. We are not wedded to any single sector of the economy or particular size of company. Rather, we try to buy well-run businesses selling at substantial discounts to our estimates of their value.

In sports, life and investing, one of the major keys to success is avoiding mistakes. In football, the team that commits fewer turnovers wins the game almost 80 percent of the time. In investing, the best way to limit mistakes is to invest only in companies in which you have an in-depth knowledge and understanding of key factors such as management, the company’s products, the competitive environment and its accounting.

Our search for value has led us to a portfolio of less than 20 companies whose median market cap is $18 billion (the range is $1 billion – $238 billion). The advantage of a “best ideas” fund such as ours is that we are free to move wherever we find value. Our plan remains to cast a wide net in North America and buy value where we can best find and understand it.