Podcast: A FIFO Approach to Global Investing
We're seeing opportunities in countries where the virus hit first as those may be the first to recover. In our latest podcast, Alger Portfolio Manager Pragna Shere provides a global perspective on the current economic crisis and how companies in different geographies may be affected.

ALEX BERNSTEIN: Hello, I'm Alex Bernstein and you're listening to The Alger Podcast: Investing in Growth and Change. Today, we’re trying to get a global perspective on the current economic crisis and how companies in different geographies may be affected. And so, I’m speaking with Alger Portfolio Manager Pragna Shere who, along with Greg Jones, manages our international strategies. Pragna, thanks so much for talking with me this afternoon.  
PRAGNA SHERE: Thanks, Alex.  

ALEX: Pragna, to start, can you give us your perspective on what’s going on right now with the markets? 

PRAGNA: Sure, Alex.  Well, obviously there’s a great deal of volatility and uncertainty that’s been caused by the COVID-19 virus.  We’ve witnessed a very sharp decline in international equities in a relatively short period of time.  The market really started to sell off the third week of February into the third of March, international markets were down almost 35% during that timeframe which is pretty remarkable, given it was just four weeks.  But having said that, it’s created some very interesting opportunities for us, and it’s given us the chance to buy some growth stocks that have been on our radar screen previously, but we felt were fairly valued.  After the selloff they’ve come down to far more attractive levels, and we’ve been able to take advantage of those share price declines. 

ALEX: Pragna, I know you and Greg track activity in China on a regular basis.  What were your thoughts when all of this started earlier this year?  

PRAGNA: So, this is very interesting because my co-manager, Greg Jones, was actually in China the week before.  He was attending a conference, and the Chinese management teams were actually very bullish on the outlook, coming out of the trade dispute with the U.S., and it felt like there was also a lot of stimulus, and it felt like Chinese companies’ outlook was a lot brighter for a Chinese company, and all of that changed a week later.  As soon as he returned, everything had changed and, to be honest, I hadn’t expected that.  I expected this to be contained within Asia, and that’s what we had seen in the previous outbreaks and viruses. And the spread of it to Europe and the damage that it had created in Italy was really a bit of a surprise.  It was very different in that respect. 

ALEX: Did Greg have a sense that he was getting out before it may have been too difficult to get out? 

PRAGNA: So, he had come back, and I think the traffic and the travel was still open.  I do think he felt like he got out right before the virus really spread.  So, I think he was fortunate in that respect. 

ALEX: And what’s your impression of how China has managed the virus? 

PRAGNA: Yes.  I think they’ve done a good job in locking down the epicenter of the virus and the province, so I think that that has been very successful, and I think what you're seeing now is this very slow reopening of the economy and then the adjustment to some sort of normal life.  To me, what it highlights is it’s going to be a gradual process, and it’s not the day the economy reopens.  It’s not back to normal.  It’s going to be a very gradual recovery. 

ALEX: Can you tell us what types of adjustments you’ve been making with your strategies in light of what’s been going on?  

PRAGNA: So, we’ve taken advantage of the selloff to increase our exposure to some of the technology and consumer stocks that we believe have very strong secular growth profiles and, at the same time to fund that, we’ve reduced exposure to sectors and names that we believe will take a little bit longer to recover.  

So, we’ve reduced our exposure to some names in energy, financials and business services.  So, prior to the selloff there’s a clear theme of a switch to digital payments, and in Europe some countries are still behind the U.S. which is behind Asia in terms of electronic payments, and some of the names in Europe had really gotten very expensive prior to the decline, and we were on the sidelines waiting for an attractive entry point, and the selloff gave us the opportunity to get involved in a name in the Netherlands and a name in Italy as well in that space.  

And from a geographical perspective we’ve shifted our exposure in emerging markets.  So, while we’ve increased the exposure in China, we’ve reduced it in India, Brazil and Russia.  We increased our weighting in Italy, and that was really mainly because Italy was hit so hard in the stocks.  It sold off so hard, and we believe there are so many attractive names in Italy that we felt it provided attractive entry points. We’re a little bit more bearish on Russia in the short term given the challenges within the energy sector. 

ALEX: Do you have a particular process for managing your different geographies?

PRAGNA: It really does vary by country.  So, what we’re seeing now in terms of the opportunities and the way we’ve actually approached this is we focused on the countries where the virus hit first, with the idea that first in, first out.  So those would be the first countries to recover from this.  

So, for example, when this was very much embedded in China, we took advantage of the weakness in Chinese stocks and increased our exposure to some Chinese names, and we did the same thing in Italy.  There are some Italian names that we have followed for a very long period of time, and some names had sold off by 50%, and we believe it created very, very attractive entry points for us.  

ALEX: Pragna, has the current crisis changed your feelings about company fundamentals in any way?  

PRAGNA: I think that corporates are clearly facing some difficult times and uncertain environments, but we remain pretty positive on the fundamentals of our holdings within the portfolio.  We tend to focus on companies that have strong balance sheets and very strong management teams that we have known for a long time, and we have confidence in their ability to effectively manage the cost base and weather the storm.  

I have been impressed with some of the responses by the management teams.  Clearly, they’ve all highlighted the priority of keeping the employees safe and healthy as being the key priority, but they’ve also highlighted the importance of maintaining the strength of their brand.

ALEX: Pragna, a final question.  I know travel can be a key part of your research and now that’s clearly limited.  How has that impacted your process?    ​
PRAGNA: Technology has made it very easy for us to communicate and, I think, to carry on as much as normal.  In terms of having access to research and companies, it’s been very surprising how accessible company managements have been.  Clearly, they want to communicate with investors during this difficult time, and they themselves are not traveling, and they have a lot more time to do video calls and communicate with investors.  So, I have to say that that’s been a pleasant surprise.

ALEX: Pragna, thanks so much for talking with me this afternoon.  

PRAGNA: You’re very welcome.  

ALEX: And thank you for listening.  For more information on Alger International strategies, and for our latest insights, please visit www.alger.com. 

The views expressed are the views of Fred Alger Management, LLC (“FAM") and Alger Management Ltd. (together with their affiliated entities “Alger") as of May, 2020. Alger has used sources of information which it believes to be reliable; however, this publication is not intended to be and does not constitute investment advice. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security, or any funds managed by Alger. 

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