A most contrarian style brings positive results
www.iht.com Judith Rehak International Herald Tribune January 20, 2003 Investors in emerging markets are by definition contrarians, but Rajeev Bahman, manager of the Oppenheimer Developing Markets Fund, takes things a step further. His portfolio surged 12.7 percent in the fourth quarter, despite a strategy that often shuns the most popular markets and stocks in this volatile sector, and sticks with others that many investors avoid.
A case in point, Russia’s oil producers were some of the biggest winners this year, though not for him. ‘‘The reason for Russia’s success is the very high oil price, which I don't think is sustainable,’’ he said. ‘‘If prices go down, the rose-colored vision will be altered.’’
His stake in South Korea is only 11 percent, compared with 20 percent for most funds, and notably missing is Samsung Electronics Co. ‘‘To be frank, indexes were never a basis of my decision-making,’’ said Bahman, a bottom-up stock-picker. As for Samsung, he said, ‘‘It’s in everyone’s portfolio, and if everyone owns it, it’s highly unlikely that you'll do better than they will.’’
Where Bahman has done well lately is in Brazil. While investors panicked over the prospects of a new, left-leaning president and bailed out in droves, he hung on to his positions in companies ranging from Empresa Brasileira de Aeronautica SA, or Embraer, the air craft maker, to consumer-oriented telecom plays. His perseverance paid off handsomely when President Luiz Inacio Lula da Silva appointed a well-respected economic team and promised to exercise fiscal discipline, causing Brazil’s stock market to rally 32 percent from its mid-October low of the fourth quarter. But country-wise, Bahman’s biggest bet is an outsized 22 percent on India. ‘‘It’s a market with excellent opportunities, good prices and where returns are improving while the cost of capital is falling,’’ he said. Like many investors, he likes India’s software outsourcing sector, noting that despite the slower U.S. economy the sector continues to grow at 20 percent to 30 percent a year. But instead of Infosys Technologies Ltd., the outsourcing company that is a staple of emerging markets portfolios, he owns NIIT Ltd., which trains workers for that industry. Demand is growing rapidly for such people, he said, adding, ‘‘NIIT’s competitors got in too late and lost out when they promised more than they could deliver.’’ NIIT shares zoomed 44 percent in the fourth quarter.
Bahman also likes stock-specific plays in rocky markets that are avoided by most investors.
His stake in Jollibee Foods Corp., the Philippine equivalent of McDonald’s, surged 30 percent in the quarter, even though the market plunged 20 percent.
Always on the outlook for new contrarian plays, Bahman has been building a 3 percent position in Egypt, where the economy is stagnant and there are fears of currency devaluation. A favorite is Eastern Tobacco Co. ‘‘It has a 25 percent return on equity, a good dividend and no significant competition,’’ he said. ‘‘They’re moving to another factory and their old one in downtown Cairo is worth their market cap, so that’s more value.’’
___________________________ For more information:
OPPENHEIMER DEVELOPING MARKETS FUND. Web site: www.oppenheimerfunds.com