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Lockdown life and hidden gems: Vontobel's Merz adjusts to a new EM world

Citywire + rated Merz believes the value aspect of equity in the developing world cannot be overlooked and the pandemic could provide potential openings.

Lockdown life and hidden gems: Vontobel's Merz adjusts to a new EM world

To Citywire + rated Roger Merz, investing is like browsing for hidden gems in a market, and the golden rule of bargain hunting is to never overpay.

‘We only buy companies that offer a discount on their fair value,’ the Vontobel portfolio manager told Citywire Selector’s sister site Citywire Switzerland.

Merz is responsible for four funds, including the CHF 5.5bn ($6bn) Vontobel mtx Sustainable Emerging Markets Leaders, which ranks 10th out of 193 strategies for total return over five years in the Citywire database.

‘There could be plenty of reasons why the shares of a company come under pressure: maybe the last quarterly results disappointed, the company is misunderstood by the market or maybe there are macro fears,’ he says.

But to catch Merz’s attention, an advantageous price is not enough. Stocks also need to have the potential to generate good returns on invested capital.

‘A company needs to prove that for every dollar it invests in its business, it can generate superior returns. It can do it by owning a strong brand that people are willing to pay for, by hiring better software developers and engineers or by creating more innovative products,’ he says.

To make sure, he keeps the standards high. Merz only looks for opportunities among the top 25% most profitable companies in each sector.

To read the full story, please visit Citywire Switzerland here.

 

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