2Q2023 – Emerging Markets Growth Commentary
As investors, we focus our attention on the long-term fundamentals of the companies we own
Going beyond with the Polen Emerging Markets Growth Team
At Polen Capital, we see emerging markets growth through a long-term lens, taking an active approach strategically guided by independent and curious thinking. With an investment framework built from on-the-ground due diligence and macroeconomic insights and by keeping an index-agnostic, absolute-return mindset, we offer a bottom-up, concentrated portfolio built for the long term and differentiated exposure to emerging markets.
Focusing on our specific set of key growth indicators, our best-ideas approach and research-driven collaboration empower our search for what we believe to be the best investment opportunities across the entire market-cap spectrum within the emerging markets universe.
Expertise, Experience & Analysis
The Polen Emerging Markets Growth Team is an experienced group where every member contributes as a research analyst. We collaborate to build group knowledge based on independent research and a flat structure where everyone has a voice. This best-ideas process is designed to uncover what we believe are unique, quality opportunities well-positioned for growth in their markets.
Located: London, UK
Head of Team: Damian Bird, Portfolio Manager & Analyst
Average Team Member Experience: 15 years (as of 06-30-2023)
Our Investment Philosophy
Concentrated Portfolio: High Active Share + Best Ideas Portfolio
Risk Management: Don’t Lose Mentality
Hold Period: Long-Term Time Arbitrage
Outcome Orientation: Benchmark Agnostic + Absolute Return Mindset
Investing in emerging markets requires a long-term investment framework. It is over many years that billions will escape from poverty, cities will rise to the sky, and corporate champions will develop.
—Damian Bird, Head of Team, Portfolio Manager & Analyst
Polen Emerging Markets Growth Strategies
Emerging Markets Equity, Diversified Emerging Markets
Number of holdings: 25-40
Emerging Markets Equity, Diversified Emerging Markets Small Cap
Polen Emerging Markets Small Company Growth
Number of holdings: 25-40
Emerging Markets Equity, Diversified Emerging Markets
Polen Emerging Markets ex China Growth
Number of holdings: 25-40
Our In-Depth Approach
Polen Emerging Markets Growth Stock Selection Process
Our Emerging Markets Growth Team selects what we believe are high quality companies with difficult-to-replicate competitive advantages. We invest independent of benchmark allocations, based on key indicators for long-term growth—we look for companies that, in our opinion, can earn excess returns not just today but for many years in the future. Using a business-owner’s mindset, we conduct deep on-the-ground due diligence and access new economies to find and evaluate attractive opportunities around the themes of domestic consumption growth, economic catch-up, and digitalization in an effort to drive growth and long-term staying power.
The Polen Emerging Markets Growth strategies typically hold 25 to 40 companies that the portfolio management team feels are the highest-quality growth names. Examples as of 06/30/2023 include:
Anta is a leading sportswear company in China that operates a tiered multi-brand portfolio. This portfolio includes leading Chinese and established global sportswear brands. The success of Anta is built on a deep knowledge of the Chinese consumer, consistent operational execution, an asset-light structure and strong control and visibility over its supply chain. This typically results in leading operating margins and returns. We believe future growth will be driven by market share gains and the growing importance of wellness as Chinese consumers move up the income ladder.
Dino is a Polish supermarket chain, operating standardized local discount stores. Unlike its peers, Dino focuses purely on the rural Polish consumer, a format which has remained unchanged since its founder refined the formula in 2010. Since listing in 2017, store numbers, sales, and earnings have compounded at healthy rates, while averaging a return on invested capital of close to 20%. Continued growth is expected to be driven by further store expansion, shifts in consumer behaviour, market share gains and increasing returns on capital as the store base matures.
dLocal is a payments processing company headquartered in Uruguay. It focuses on processing online payments for large, multinational enterprise customers in Emerging Markets, enabling them to seamlessly make and receive payments in over 35 countries in any currency. Solving this has enabled the business to grow rapidly to a Total Processing Volume of over US$10bn in 2022, just six years after its formation. This exceptional growth has been self-funded and low marginal operating costs leads to an attractive margin structure. Additionally, serving as a digital intermediary means capital intensity is low, which drives strong cash flow generation. We expect the business to continue to compound over the coming years.
Recent Emerging Market Growth Perspectives
Press Release: Polen Capital Expands Emerging Markets Capabilities
Franchise will now include six strategies & 10 investment professionals based in London & newly launched Hong Kong office
Tales from Emerging Markets: Vietnam’s Resilience
We believe that Vietnam will remain a bright spot in 2023 despite a more challenging backdrop
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A Collaborative & Research Driven Team
Polen Capital Management, LLC is an independent registered investment advisor.
The information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of the period indicated , may involve a number of assumptions and estimates which are not guaranteed, and are subject to change without update. Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without update, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients. This information does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction.
Holdings are subject to change. The holdings, as well as other data, are as of the period indicated and should not be considered as a recommendation to purchase, hold or sell any particular security. There is no assurance that any of the securities noted will remain in a portfolio at the time you review this information. Actual holding and percentage allocation in individual client portfolios may vary and are subject to change. The securities discussed do not necessarily represent the entire portfolio. It should not be assumed that any of the holdings discussed were or will prove to be profitable or that the investment recommendations or decisions we make in the future will be profitable. A list of all securities held in this portfolio in the prior year is available upon request. Past performance does not guarantee future results and profitable results cannot be guaranteed.
Absolute Return: is the percent amount that an asset rises or declines in value in a given period. Active Share: is a measure of the percentage of stock holdings in a manager’s portfolio that differs from the benchmark index. Excess Return: returns achieved above and beyond the return of a benchmark.