Mark Mobius Speaking on a “Passport To Profits” panel at the SALT Conference.
Also see
- Jim Chanos: Oil E&P Model in North America Isn’t Economic; Looking at Aramco; Cheniere Is ‘Dramatically Overvalued’; Was Short LC
- Stock Pitch Panel: Richard Chilton, John Lykouretzos (Hoplite), John Burbank, Jim Chanos
- Kyle Bass, Leon Cooperman Diverge On Economy
- Sam Zell At SALT 2016: We Are Subsidizing Billionaires Buying Tesla Cars!
- Ken Griffin On Lessons Learned From Early Years
- Nassim Taleb Has Mercy On Janet Yellen
- David Rubenstein: Surprised Macro Hedge Funds ‘Got It Wrong’ And More; Clinton Likely To Win
- Activism Panel: Scott Ferguson, Cliff Robbins, Jeff Smith
- Michael Lewis On Michael Burry, Christian Bale and The Big Short
Mark Mobius: “Passport To Profits”
“We have been and we are. We think that the opportunities in Brazil are tremendous. You have to go back and see how Brazil has progressed. When I went in the early 90s, they were at 2000% inflation…. This is the situation you have where the country has gone through incredible changes. It’s a young population. I believe it’s a temporary situation.”
Dilma may be impeached, Liz Claman points out
“A great time to invest is when there’s been a lot of uncertainty,” Mobius said. “Chances of [Dilma] being impeached is very high.”
Liz Claman: How about contagion?
Mark Mobius: Seems upbeat about Argentina
Liz Claman: Short any countries?
Mark Mobius: We don’t usually short. We get out. If we were short, it would be Venezuela.
We are not getting out of Colombia, Peru, or Chile.
We probably would not go in Bolivia. Conditions are not good. Not many companies to invest. And government is not that friendly to business.
Liz Claman: What do you look for when investing?
Mark Mobius: 1. Can you get money out?
2. Will government be taxing to a degree where it will kill business?
3. What’s the situation with the currency… a weak currency is often good. Brazil for example. Therefore, we can buy company shares in US dollars that are much more attractive.
Liz Claman: where are you buying? What are you buying?
Mark Mobius: We have been targeting commodities. we continue to buy commodities related stocks. In our view, there’s upside. Commodities have hit bottom.
We are looking at consumer oriented stocks that have been beaten down. We can find well managed consumer companies— retail, telecom to some degree (have to be careful due to regulations). I’m talking about soft drinks, beer companies, household appliances.
Liz Claman: Would you go to the Olympics?
Mark Mobius: I would! I would go. In fact, i was at the Olympic village just outside of Rio. They built a nice facility. We must remember there are parts of Brazil that are no different than her in Vegas or anywhere else in the United States.
Generally speaking, you can travel and live in Brazil and be very safe.
Liz Claman: Let’s shift to China. Brazil is Mobius’ most favorite EM right now.
Mark Mobius: If you look at China, China is the largest country in which we’ve invested in terms of the amount of money. The reason is not only macro economics situation good, you’re talking 6 or 7 percent growth, a lot of infrastructure is in place. They have a long way to go.
I did a five city tour, these are secondary cities, on high speed trains. This is infrastructure that is amazing. You are getting a transition from manufacturing to a consumer/service economy. May take maybe five yeas for that transition to take place. There are incredible opportunities.
Look at the internet. Largest internet usage is China
Liz Claman: Where is the play in China?
Mark Mobius: You have to be careful in internet space. Now we are looking at oil companies in China. On refining and down stream they are making good money. And going forward, population of automobile dealers will be growing. They will be achieving where the US is. WE believe there’s great opportunity in that arena.
Liz Claman: Apple fell yesterday. Would you stay away from technology? The fact China manufactures some parts for Apple.
Mark Mobius: No. The sales of smartphones are skyrocketing. We are looking at a billion smartphones sold globally. Seeing companies like Huawei taking market share away. This is a growth market that will continue.
We are looking at the component makers, the ones who make the chips. TSMC for example.
Liz Claman:Any outsider Asian markets you like?
Mark Mobius: Vietnam. They are making a transition from controlled economy to a market economy. the communist party realizes they have to be more market oriented. They have to encourage investment. The Vietnamese are incredibly dynamic people, very creative.
It’s an incredible place. You have a difference between north and south with the south really driving the economy. A number of Vietnamese who were overseas are now coming back with money and investing.
Liz Claman: Frontier markets? Favorite?
Mark Mobius: Probably Nigeria. Because I know they scare you. Nigeria has been beaten up because of oil. The good news is with low oil price they have to face reality.
He would invest in banks in Nigeria. They have tremendous growth prospects. A big population of Nigerians don’t have bank accounts. The opportunity is very very good. It’s a fast growing country.
Liz Claman: Are you worried about corruption there?
Mark Mobius: It’s every where. Every where you go you have corruption. … First thing we do is look at the people running companies. who is behind the company? Etc.
It’s essential in EM and frontier markets… to do investigations. We hire private investigators to look at background. With internet, transparency is better.
Liz Claman: How many miles do you fly?
Mark Mobius: I circle globe five times a year.
We have 18 offices around the world.
Liz Claman: Russia. Is it still EM?
Mark Mobius: It is an EM. The definition is changing.
Liz Claman: Track record. Worst investment? biggest mistake?
Mark Mobius: There are a lot. Biggest mistake was in Indonesia. It was a pulp and paper company. We had visited the eucalyptus plantations. Numbers looked right. They were putting money in banks with Indonesian names, but not in Indonesia. They fooled us. We were able to get some money out. Lost about 40 or 50 percent. Lost 100mm in that company.
The good companies make up for the bad ones.
Liz Claman: Best pick you’ve ever made?
Mark Mobius: Best pick…believe it or not was Brazil in 1995/96. We had invested in a company called AmBev. The management of AmBez is not controlling the successor company. There’s an example where meeting the management meant a lot. I remember going in the offices. These gentlemen came in in jeans and t-shirts. Thought they were repairmen. They were running the company. They were really getting their hands dirty. They were out with the trucks delivering the beer. That was impressive.
Liz Claman: Which market has power to effect what happens here.
Mark Mobius: The Fed. Interest rates. A lot of money coming into the US has been with the expectation that US dollar would get stronger and interest rates would go up. Created a giant sucking sound bring money from EM and into US. Now you can hear the reverse of that. People think Fed will not raise rates. I don’t think they will raise rates anytime soon…end of the year. Because the numbers don’t look that great. And the stock market is picking up. If you’re sitting on the Fed board, you can’t help but thinking why are we raising rates?
The reality is the Fed is looking at the economy more than looking at inflation. They are confused.
Liz Claman: Next bubble?
Mark Mobius: Probably related to finance. Tech finance. In other words, the new innovations that are being made on the internet with regards to things like peer lending. I think that could be creating a bubble.
The speed at which new innovations are being adopted. very difficult to keep up with. I say it’s because of the speed of these events.
Liz Claman: Theranos?
Mark Mobius: Saw her talk. She’s impressive. Had my doubts because of regulation. She speaks very well about it. But the government regulation may hit her.
Liz Claman: Presidential election ?
Mark Mobius: My brother who lives in Buffalo said Trump a year ago to win. When people ask me, I saw I don’t like what he says but I like the way he says it. He’s a great negotiator. i don’t see any of these things about trade wars coming to pass I think he will negotiate and get deals done.
[/drizzle]
