Over the past several years, Marcus has taken to investing in family-controlled conglomerates within developed markets. As European companies become more efficient to compete globally, they naturally unlock some of their intrinsic value, says Marcus.
Since many traditional European conglomerates already had strong balance sheets and quality management, any move to create efficiency naturally creates earnings growth. If the companies the Evermore fund selects also grow their revenue, “explosive” earnings growth may occur.
U.S. companies, for the most part, are not creating these “explosive” growth opportunities in 2017, says Marcus, even as more positive earnings reports and projections roll in.
Rather than investing directly in growth and value opportunities within emerging markets, Marcus prefers finding companies doing business within frontier and emerging markets that are domiciled in Europe, Japan or the U.S.
“We’ve found that we can sneak into emerging markets through cheap European stocks and we end up with high growth businesses at no-growth or low-growth valuations,” says Marcus.
The Evermore fund also invests in what Marcus calls “compounders,” long-term holdings with strong management that tend to expand in value over time.
Political instability, crises and other disruptions provide more chances to invest, says Marcus.
“We look for opportunities during periods of disruption, fear, stress and strain,” Marcus says. “Most of these companies adapt because of a crisis, they adapt because they understand that they need to change to be successful, they adapt because they have good management. We don’t just bet on companies, we’re betting on the people who are running the business.”