Gavekal Capital: Will EM Hyper-Cyclicals Ever Get Back Into Investor's Good Graces?

Thursday, September 11, 2014

Will EM Hyper-Cyclicals Ever Get Back Into Investor's Good Graces?

We noted early this week that Emerging Markets are strongly outperforming Developed Markets in 2014. It certainly pays to be in the right sector in the Emerging Markets because if you have been in hyper-cyclical stocks (Financials and Information Technology) you are probably shrugging your shoulders at your meager outperformance. On the other hand, if you have been in EM hyper cyclicals longer than three years you are probably doing back flips over the outperformance this year.

The following charts are going to look at how Emerging Market hyper-cyclicals have performed against the MSCI Emerging Markets Index across a variety of times slices. The punch line is unless you got in during a select few periods over the past few years, you haven't outperformed in a long, long time. In ascending order from year-to-date to 20 years ago.

And just for fun, it pays (BIG) to bet on the consumer...

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Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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