Philosophy
Our investment philosophy is that markets are inefficient because investors tend to overreact to short term events and cause stock prices to deviate from a company’s underlying business fundamentals. Within emerging markets, DCM believes that mispricing is even more pronounced as a result of passive money inflows/outflows and lack of adequate information. Our Emerging Market strategy has achieved consistent risk-adjusted returns by systematically identifying companies that are undervalued relative to their long term earnings power as stock prices generally follow business fundamentals over the long term. (Please refer to DCM Emerging Markets Equity Fact Sheet).
Within Emerging Markets, DCM also analyzes and seeks to understand top down country-specific risks relative to opportunities. This effort serves as an additional source of value added to relative risk-adjusted returns as investors also tend to misprice risk at the country level.
Process
DCM combines proprietary valuation models with in-depth fundamental research to opportunistically identify the most attractively valued emerging market securities. The valuation models systematically assess profit trends and potential risks to earnings power for the entire investable universe on a daily basis. In-depth fundamental analysis results in proprietary estimates of normalized earnings power, normalized cash flow generation and the sustainable earnings growth rate. Within Emerging Markets, DCM also evaluates risk at the country level through top down macroeconomic analysis and allocates capital accordingly. This risk-controlled portfolio construction process seeks to avoid uncompensated investment risk and, by maintaining a long-term investment horizon, DCM believes we can effectively exploit valuation anomalies.
