Studies show that investors with an anti-cyclical approach focused on undervalued companies will achieve above-average returns over the long run. Similarly, the investment returns from attractively valued regions are clearly likely to exceed those of expensively valued geographies. We take advantage of such factors in our global equity strategies by investing in undervalued value stocks from the most attractive countries and sectors, which includes selective investments in weakly correlated turnaround and GARP stocks that can optimize the fund's risk/return profile.
Investment Case Global Equities
Stock selection process
Investors love stocks with high earnings growth and are willing to pay a hefty premium to own them. The upside potential associated with high growth stocks such as Facebook, Amazon, Netflix and Google (FANG) puts a sparkle in the eyes of many investors. In reality, however, investors rarely achieve superior returns with growth stocks. This is because above-average earnings growth rates and lofty growth expectations are usually unsustainable over the long term. Hopes of fast earnings growth are often undone by greater competition. The result is a disappointing stock performance. There is convincing empirical evidence that companies with high valuations and/or that are expected to generate high earnings growth actually produce the lowest returns in the long run.
Conversely, the unloved stocks with attractive valuations offer the greatest return potential over a long-term horizon. We therefore take an anti-cyclical approach and invest in undervalued companies, using momentum indicators (study) to improve the timing of our investment decisions. In most cases we do not base our investment decisions on any short- to medium-term forecasts.
As with any investment strategy, value investing is subject to cycles of its own, so we selectively add turnaround and GARP stocks with low correlations to our portfolios. Such stocks can flatten out style-specific cycles and thus enhance the risk/reward profile of our portfolios.
Country and sector allocation has a far greater impact on portfolio performance than the individual investments themselves. Why invest in markets where the prospective returns are minimal or even negative? Our studies show that, at the country level, investing in securities that are trading at low valuations pays off: low-valuation stock markets offer the greatest potential while expensive stock markets tend to underperform.
Since 1979 investors who bought significantly undervalued stock markets with a P/B of less than 1x achieved an average real annual gain of 14.1% over the following 10-15 years. Meanwhile investors who invested in pricy market periods when the average P/B exceeded 3x achieved an average annual gain of 0.6% during the following 10-15 period. We therefore favor investments in countries that are trading at less than fair value and avoid the expensively priced investments, and are not bound by any benchmarks. Foreign-exchange, sentiment, liquidity and risk factors also play a role in our investment process.
The level of portfolio investment is also based on the aforementioned factors. We favor an anti-cyclical approach, investing in stock markets that are trading at less than fair value and when the general sentiment is pessimistic. When markets are overly bullish or overbought, we will reduce the corresponding level of investment.
The award-winning StarCapital fund management team boasts decades of experience and combines that experience with internal capital market research know-how.
Team Equity Strategies
Dr. Manfred Schlumberger, Head Portfolio Management
- Since 2019 a member of the Executive Board and Chief Investment Officer at StarCapital AG
- 2017 - 2018 Member of the Executive Board and Deputy Chief Investment Officer at StarCapital AG
- 2016 – 2017 Chief Investment Officer at Berenberg Joh. Berenberg, Gossler & Co. KG
- 2001 – 2016 Management spokesman at BHF TRUST
- 1994 – 2001 Executive Officer at Frankfurter Volksbank eG
- Studies in economics, post-graduate degree in economics
Norbert Keimling, Portfolio Manager
- Since 2006 authorized officer and Head of Quantitative Value Strategies and Capital Market Research at StarCapital AG
- 2004 – 2006 Analyst at Huber Portfolio AGl
- Business informatics studies, degree in business informatics
Dr. Nora Imkeller, Analyst
- Since 2016 Analyst for Portfolio Management and Capital Market Research at StarCapital AG
- 2011 – 2013 Research Assistant at the Fraunhofer Institute for Industrial Mathematics
- 2009 – 2013 Post-graduate studies in portfolio optimization, Dr. rer. nat.
- Studies in industrial mathematics with a focus on financial applications, mathematics and economics degree (Dipl.-Math. oec.)
Our investment solutions
With our global StarCapital equity funds we offer UCITS-regulated investment funds with daily liquidity, which are managed on the basis of the explained countercyclical investment strategy.
Markets & Opinions / 21.08.2017
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Markets & Opinions / 01.03.2017
Norbert Keimling im Interview mit die Fondsplattform.