Why active investing can solve the argument over Asian equities
In early October, the World Bank issued a tough assessment on Asia, warning that the region’s...
Certain brands are instantly recognisable. Their reputations and distinctive logos are known across the world, while any mention of their names will generate an instant reaction. Just think about fast food chain McDonald’s, global bank HSBC, and the iconic Ferrari supercars. All of them have a global presence and enjoy bumper annual revenues.
But how does this translate into a company’s overall value – and what are the ways in which investors can get exposure to these international giants?
Consultancy Brand Finance analyses 5,000 of the world’s biggest companies to publish reports ranking them in terms of country and sector-specific factors. It considers millions of data points that are scrutinised, calculated, and combined to provide results that are used by chief finance officers and fund managers.
For example, a recent study found Mercedes-Benz was the most valuable European brand, with its value edging up 6% to €52.4bn, despite it having been a tough year for auto manufacturers*. Deutsche Telekom came in second on €51.9bn, followed by energy giant Shell in third sport on €43.1bn*. The oil major was also the UK’s most valuable brand*.
Of course, a strong corporate identity can result in more customers and higher profits. In turn, these can transform into handsome returns for investors in the business.
These investors include managers of investment portfolios such as the Morgan Stanley Global Brands fund. The portfolio is run by an experienced 10-strong team that’s led by William Lock, head of international equities.
The team believes high quality companies built on dominant market positions and underpinned by powerful intangible assets can generate attractive returns over the long term.
The fund’s current largest holding, with a 9.13% share of assets, is in Philip Morris International, a leading international tobacco company listed on the New York Stock Exchange**. Its brands include Marlboro, which has been one of the world’s most recognisable names for the past half a century, as well as Parliament, Bond Street, and Chesterfield. The portfolio’s second biggest position is in US tech firm Microsoft**. The company, founded by Bill Gates back in 1975, has established itself as a leading name in software.
Another fund that could be worth considering is Lazard Global Equity Franchise, which looks for companies with an edge in their respective business sectors. It invests in listed companies that have an economic franchise, defined as possessing a combination of high degree of earnings visibility and large competitive advantages.
While the four-strong fund management team can consider stocks of any size, the fact industry leaders are favoured leads to a natural bias towards larger companies. Strong brands, alongside intellectual property, high barriers to competition, and natural monopolies are seen as very attractive qualities.
This fund’s largest holding is currently in a US company called Tapestry, a US-based luxury fashion holding company**. Its brands are Coach, Kate Spade New York, and Stuart Weitzman footwear.
The good news is that powerful brands with great reputations can be found around the globe. For example, Samsung Electronics is the third largest holding in the Matthews Pacific Tiger fund**.
The South Korean business specialises in producing a wide variety of consumer and industry electronics, including smartphones, televisions, and fridges.
The fund is a high conviction, low turnover portfolio of stocks expected to benefit from the growth of the Asian consumer, and it benefits from a focus on corporate governance, expert local knowledge, and the undertaking of numerous company meetings.
GQG Partners Emerging Market Equities also has several recognisable names in its portfolio. Current top ten holdings include Coca-Cola Co, the soft drink manufacturer. Since it announced its intention to begin distribution in Myanmar in June 2012, Coca-Cola has been officially available in every country in the world except Cuba and North Korea. The fund also owns shares in Heineken and Exxon Mobile Corp**.
Then there is the TM Redwheel Global Equity Income fund. According to the fund’s most recent factsheet, its portfolio contains a list of familiar global brands, including British American Tobacco, whose own brands include Dunhill, Lucky Strike, Rothmans, and Camel**. Diageo is another prominent position**. The drinks company’s brands include Baileys, Smirnoff, Captain Morgan, Johnnie Walker, and Guinness.
Few corporate names on the planet are more recognisable than Google. The search engine is the first that comes to mind whenever most of us want to look up something on the internet. In fact, so powerful is the name that it was added to the Oxford English Dictionary as a verb in 2006!
Google’s parent company is Alphabet and it’s the current largest holding in the Liontrust Sustainable Future Global Growth fund**, managed by Simon Clements, Peter Michaelis, and Chris Foster.
This fund identifies key structural growth trends and the companies most likely to benefit.
It’s also an investor in Visa, the global payments technology company that connects consumers, businesses, and governments in more than 200 countries**.
*Source: Brand Finance, Europe 500 2022
**Source: fund factsheet, 30 April 2022