Seafarer Capital Partners Reveals Key Drivers of Performance in Emerging Markets Value Investing

Core Insights - Seafarer Capital Partners published a white paper based on 14 years of research and 8 years of managing the Seafarer Overseas Value Fund, focusing on value investing in emerging markets [1][2]. Group 1: Investment Strategy - The white paper titled "Revisiting the Seven Sources of Value in Emerging Markets" outlines practical lessons learned from investing in seven distinct sources of value identified in 2016 [2]. - Seafarer's approach emphasizes identifying underlying sources of value rather than relying solely on traditional valuation multiples [3]. - The paper reviews the impact of each source of value on the Fund's performance since its inception, providing a nuanced analysis and examples of "emblematic stocks" [3][5]. Group 2: Key Lessons from Sources of Value - Asset Productivity: Companies with low costs and high margins can endure cyclical downturns, making timing less critical [4]. - Structural Shift: Companies that generate high cash flow but shift to lower growth rates have presented investment opportunities, particularly noted in China (2016) and Brazil (2020) [4]. - Balance Sheet Liquidity: High cash levels can indicate potential "value traps," suggesting poor capital allocation or weak governance [4]. Group 3: Fund Overview - The Seafarer Overseas Value Fund aims for long-term capital appreciation by investing primarily in securities of companies in developing countries, focusing on common and preferred stocks [6]. - The Fund employs a bottom-up security selection process based on fundamental research, targeting securities priced below their intrinsic value [6].