THE INVESTOR CENTRE
THE INVESTOR
|
35
I
n spite of the ongoing political turmoil,
we thinkThailand provides an attractive
environment for select growth businesses.
We own twoThai companies: CPALL, the
master franchisee of the 7-Eleven brand
in the country, andAirports of Thailand,
operator of six airports that handle more
than 80% of the country’s air tra c.The
bulk of CPALL’s new store openings are
planned forThailand’s upcountry, and we
expect the company will bene t from
increased development within the region.
Anticipated infrastructure investments to
address long-standing bottlenecks should
facilitate trade and long-term economic
growth and raise incomes in the region,
thus increasing the purchasing power of
potential CPALL customers.As forAirports
of Thailand, we expect international and
domestic passenger tra c will reaccelerate
as political tensions dissipate.Thailand is
one of the world’s most popular tourist
destinations due to its varied o erings
(e.g. beaches in the south, eco-tourism
in the north and urban experience in the
centre) and we think increasing tourism is
a long-term trend, driven most notably by
rising incomes in theASEAN region.
We retain conviction in our investments
in both CPALL andAirports of Thailand
and think each will generate above-average
earnings growth over the next ve years.
David Levanson, Sunil Thakor and
Perry Williams
SANDS CAPITAL
Satellite manager: Global Equity
Rising incomes in ASEAN region
helping to increase tourism
Thailand is one of the
world’smost popular
tourist destinations
D
espite heightened geopolitical risk and
the stuttering improvement in global
economies, volatility is close to its all-time
low set in 2007.As stock-pickers, we thrive
on volatility.The true value of a company
does not swing about as aggressively as
its share price but increases slowly as it
reinvests cash into its business and makes
a return on that investment.Therefore,
today’s low volatility reduces the number
of new investment opportunities as it limits
our ability to either buy or sell companies
at attractive prices. Furthermore, a period
of low volatility can suggest an increasing
level of future risk. It makes investors and
companies feel more comfortable and as
a result they tend to increase the use of
leverage and take more risk in the belief
that the future will be as benign as the
recent past.While there are few signs of
this today, history tells us that some of the
most costly investment mistakes come from
buying below-average businesses at a time
when pro ts are buoyed at a favourable
point of the economic cycle. Consequently,
at present we are aiming to ensure we
do not become complacent. Instead, we
are adopting a conservative and prudent
investment strategy to defend the capital
gains made over the past few years.
SCHRODERS
Schroder Managed
Managed Growth
Low volatility reducing the number
of new investment opportunities
We are aiming to
ensurewe donot
become complacent
Kevin Murphy and Nick Kirrage
W
e continue to see muted global
growth, with most countries
competing in a zero-sum game.The US
economy continues to improve, albeit at a
constrained rate. European economies are
slowing again, forcing the European Central
Bank to employ an aggressive monetary
approach, which should bene t exporters
and stabilise internal demand. Emerging
economies continue to see slowing growth;
country-level political instability and
regional geopolitical risks have heightened
recently. In a challenging market overall,
we believe Select Equity’s investment style
– focused on businesses that can make their
own luck – will prove to be a favourable
one.We invest in what we believe are the
highest-quality businesses that enjoy secular
tailwinds, including niche markets, with unit
growth, pricing power, solid balance sheets
and sustainable competitive barriers.These
businesses generally lead their respective
industries and generate strong, growing
streams of free cash ow in a predictable
manner. Many of our US businesses have
cultivated comparative advantages that
should enable them to gain a larger piece of
a growing pie at home. Our European and
Japanese businesses are exceptionally well
positioned to bene t once demand recovers
in their home markets, and they should
also take advantage of an improving export
market thanks to currency tailwinds.
George Loening and Chad Clark
SELECT EQUITY
Joint manager: Worldwide Managed and
Worldwide Opportunities
Businesses that make their own luck
can be favourable for investment
Emerging economies
continue to see
slowing growth
