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4-Traders Homepage  >  Equities  >  KOREA EXCHANGE  >  Samsung Electronics Co Ltd    005930   KR7005930003

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TIP SHEET: Not All Geographic Bets Are Even For Schroder Fund

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04/13/2012 | 09:15pm CEST

--Schroder Emerging Market Equity Fund's investment thesis begins by analyzing individual nations

--Team considers gross domestic product, political unrest and election news as it picks various nations in which to invest

--Fund has returned 14% so far this year through Thursday and is outperforming the benchmark, according to Morningstar

    By John Kell 

Allan Conway keenly focuses on growth opportunities in emerging markets when investing abroad, saying the selection of the right country is more important than picking a hot stock.

Conway, portfolio manager of Schroder Emerging Market Equity Fund (SEMNX), said his fund's investment thesis begins by analyzing nations. Conway said he believes investing in emerging markets is a smart bet as those nations will be the growth engine for the global economy.

"Being in Russia or Brazil is more important than picking a certain stock," said London-based Conway. He said the fund gets 50% of value-added returns coming from country selection and 50% from stock picks, while many competitors place their bets entirely on stocks.

"For us, it's about country foremost and then finding the best stocks in each country," added Conway about the fund, which was founded in March 2006.

According to Morningstar, the approximately $464 million fund has returned 14% year-to-date through Thursday, about 6.4 percentage points above the benchmark MSCI Europe, Australasia and Far East index, rebounding from 2011's negative returns. Over the three years through Thursday, Morningstar shows that the fund has annualized total returns of 19.2%, outperforming the benchmark by 5.7 percentage points.

Conway said stock analysts are often organized by sector but the Schroder fund's team is split by country to understand regional dynamics, adding that those factors are vital to understanding how the stock will perform.

Schroder's team considers gross domestic product, political unrest and election news as it picks various nations in which to invest, focusing also on broader themes like the euro crisis and the Arab Spring revolution. He cited an example of two theoretical banks, one in Russia and the other in Mexico, saying it is more important to analyze their local environments than the fact that they both are banks.

Regionally, the fund is overweight in China, South Korea, Russia and Thailand. It is neutral in Brazil but underweight in a handful of countries, including Mexico, Hungary, Czech Republic and Poland.

The portfolio's top holdings are in the financial, energy and information technology sectors, including stakes in handset maker Samsung Electronics Co. (SSNHY, 005930.SE), gas company Gazprom (OGZPY, GAZP.RS) and auto maker Hyundai Motor Co. (HYMLY, 005380.SE). Nearly two-thirds of the fund's stock holdings are in Asia.

In the near term, Conway said Schroder is slightly cautious about returns as problems in Europe and ongoing questions about the strength of the U.S. economy affect emerging markets' performance this year, as they did in 2011.

Also, though there have been some concerns about China suffering from a hard landing, Conway said he believes authorities will do whatever it takes to ensure continued economic progress and to maintain political stability.

Over a longer period of investing, looking two to three years out, Conway said buying into emerging markets is a fantastic investment.

"If you are taking a short-term view, there may well be a better opportunity in a month or two's time, but if you are taking a two-to-three-year view, the money you are putting in today could look really good," said Conway.

(John Kell is a general assignment reporter covering alcohol and tobacco companies, drugstores and car-rental firms for Dow Jones Newswires. He can be reached at 212-416-2480 or by email at john.kell@dowjones.com.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.)

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Financials ( KRW)
Sales 2016 200 198 B
EBIT 2016 28 687 B
Net income 2016 21 648 B
Finance 2016 52 168 B
Yield 2016 1,59%
P/E ratio 2016 10,88
P/E ratio 2017 9,32
EV / Sales 2016 1,00x
EV / Sales 2017 0,90x
Capitalization 251 578 517 M
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Mean consensus OUTPERFORM
Number of Analysts 43
Average target price 1 891 487  KRW
Spread / Average Target 18%
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Boo-Keun Yoon Co-President, Co-CEO & Director
Jong-Kyun Shin Co-President, Co-CEO & Director
Oh-Hyun Kwon Vice Chairman & Co-Chief Executive Officer
Sang-Hoon Lee Co-President, Chief Financial Officer & Director
In-Ho Lee Outside Director
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