Sponsor Insights: Value Investing in the Digital Age

Value investing around the world has been declared practically dead in recent years for reasons including lack of exposure to technology companies. We believe, however, value investing is still very much alive and well—at least the way we practice it at Matthews Asia. We define value investing as looking for companies whose shares are trading at a 30% discount to our proprietary estimates of their intrinsic worth. Importantly, we are looking for companies whose intrinsic worth offers sustainable, long-term growth potential.

Active Management Can Generate Alpha

With its less-developed economies and markets, Asia is full of landmines if one blindly invests in statistically cheap companies. As active managers, we believe the quality of a company’s underlying business and its management should be considered first and foremost in a value investing strategy within Asia, even more so than when investing in the United States or Europe. Here’s our approach:

• Study the best businesses and organizations in each sector.

• Read people as well as numbers.

• Build a mental jigsaw puzzle of global opportunities and assemble all the pieces.

• Connect the dots and ask better questions.

We believe it’s the repeatable and methodical application of this process that sets us apart from many of our peers.

Tech Joins the Mix

Today, the world’s biggest companies are focused on information technology and communication services. We view the technology sector as part of the underlying fabric that now comes to underpin every industry you can think of, and when it comes to value investing in Asia, our definition of value can be a useful tool for evaluating technology companies, and my background in computer science and technology helps me look closely at the opportunity set to separate reality from hype.

A Lower Volatility Approach to Capturing Asia’s Growth

As volatility picks up globally, buying stocks at a substantial discount to their intrinsic value can help mitigate volatility. You get a double advantage, first when the initial discount to the fair value narrows and, second, as the fair value grows and compounds over time. These principles remain the same as when Benjamin Graham pioneered the value investing style more than a century ago. What’s new is the opportunity set both in terms of geography and business model. Asia represents more than half of global growth. And technology stocks, which can include digital platform business models, are part of Asia’s equity universe. As we look forward to the next three years and beyond, we find it an exciting time to be value investors in Asia.

About the author:

About the author: Beini Zhou is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Value Strategy, and co-manages the Asia Small Companies Strategy.

Important Information

Investments involve risk. Past performance is no guarantee of future results. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation.

The views and information discussed herein are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Past performance is no guarantee of future results. The value of an investment in the Fund can go down as well as up. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.

Matthews Asia is the brand for Matthews International Capital Management, LLC and its direct and indirect subsidiaries.

BY448_0119