EM Fund Stock Picks & Country Commentaries (March 23, 2025)
Beware of back floating rate loans (adjusted rate loans) used by PE, overlooked Asian stocks, Kazakhstan/India/Sri Lanka/Pakistan/Vietnam trip reports, Nubank, KASPI, Argentina, Pakistan's market, etc
I realize many people don’t like or want to listen to Alex Jones and his Infowars; but one of their reporters just had one of the most interesting discussions I’ve ever heard concerning how private equity and their use of adjustable rate loans can destroy good businesses (aka Red Lobster, Party City, Joann’s, Forever 21, Big Lots and now Hooter's) with activist Tiffany Cianci (who became an anti-PE activist after having her franchise taken away and her life almost destroyed when a private equity firm took over the company she owned a franchise from and forced her out…):
IF you DON’T want to listen to the whole hour, here is a Twitter thread and a much shorter video with the summary being - “back floating rate loans” (e.g. adjusted rate loans) are being used by private equity to buy good companies with banks then repackaging and selling the loans off to pension funds who will inevitably need to be bailed out at some point in the future (as we “aren’t doing bank bailouts” again BUT we can’t let grandma loose her pension…):
My March 10 post took a detour away from EMs to discuss the destruction that private equity has caused within the California almond industry (as my family and I have an orchard):
📰 Trinitas Partners Farming Declares Bankruptcy February 2024
📰 One of CA’s ‘Largest Almond Growers’ Files for Bankruptcy. It Owes Millions to Local Companies. February 2024
To summarize and just as Tiffany discussed in regard to what is happening in other industries, in this case the almond farming related entity in bankruptcy owes $159 million alone to Rabo Agrifinance (a subsidiary of Netherlands based Rabobank Group and one of the biggest ag financers in the world) after their 2022 $38 million floating rate loan (🤦♂️) pushed them over the edge plus there are 107 pages worth of claims to other mostly local Central Valley companies.
And just like Tiffany said regarding pension funds, large “sophisticated” institutional funds like the University of California Regents and Makena Holdings (who represents more than 50 endowment and foundation clients) were among the investors who (I assume) will have their investments potentially wiped out while local rumours that Oprah Winfrey and John Madden were also investors can probably never be substantiated given the web of LLCs involved to shield identities…
Anyone thinking of investing in anything related to private equity or for that matter, any stock that has “back floating rate loans” or adjustable rate loans on the books or PE involvement, would be well advised to listen or pay attention to what Tiffany has to say about the subject…
As of mid March, more February fund updates (our continuously updated post containing all funds is here) have become available along with some new research starting with some non-EM pieces:
🎙️🇪🇺🚩 There is a transcript for this podcast that covered a few European stocks: European growth: unique brands, hidden champions (Baillie Gifford) 34:45 Minutes
European stocks appear undervalued compared to US counterparts, creating investment opportunities
A long-term approach to European equities based on each stock’s fundamental characteristics, including pricing power and culture, is more relevant than ever
The continent is home to companies with unique brands (LVMH Moët Hennessy Louis Vuitton (EPA: MC / OTCMKTS: LVMUY / LVMHF)), that dominate niches (Spotify Technology SA (NYSE: SPOT)), and represent ‘hidden champions’ (Camurus AB (STO: CAMX / FRA: 7CA / OTCMKTS: CAMRF))
🔬🌐 A New Era of Globalization: Shifting Opportunities in a Dual-Track World (PGIM) - In national elections around the world, one theme dominated almost universally: dissatisfaction with a global economy that favors others over us. On the surface, swirling headlines around tariffs and fracturing supply chains would suggest the high-speed globalization train has been utterly derailed. However, the world has entered a new era where globalization has essentially splintered into two distinct tracks.
Track 1: A narrow set of industries deemed to be of vital national security or strategic importance, from energy to semiconductors and AI. This track of globalization has sharply decelerated, if not come to a sputtering halt altogether.
Track 2: A vast array of cross-border goods and services such as apparel and consumer electronics, gets less attention in sensationalist media stories but still represents a majority of global GDP.
Three Phases of Modern Globalization - A New Era of Globalization | Chapter 1
Sectors Caught in the Crosshairs of a New Era of Globalization - A New Era of Globalization | Chapter 2
Portfolio Implications - A New Era of Globalization | Chapter 3
🎙️🌐 This State Street podcast has a transcript: The other side in the trade war (30 Minutes) - Amidst rising tensions and trade tariffs, market discussion often lands on how rising costs of US imports will affect the American consumer, the US balance of trade and inflation, and what it means for the US dollar.
🔬🌐 There is a PDF slidedeck with this Invesco piece: In Focus: AI after DeepSeek - We think the AI competitive landscape is changing, with a renewed focus on efficiency and with more entrants into the market. Value capture from the IP of models may be shifting as open source models become more powerful. Yet, with cheaper models, we expect adoption to accelerate, which should maintain demand for computing power and the enables of AI that have so far benefitted from the boom in the technology
New Asia Fund Documents & Research
🎙️🌏🚩 The opportunity in Asian smaller companies with abrdn Asia Focus (UK Investor Magazine) 39:36 Minutes - Gabriel Sacks, Co-Manager of Abrdn Asia Focus PLC (LON: AAS) joins the UK Investor Magazine podcast to talk about the trust, and the Asian smaller companies universe.