Inflation has roiled the global economy, and higher interest rates have disrupted markets. For David Samra, a portfolio manager at Artisan Partners, these headwinds create an opportunity to invest in consumer-focused companies with low valuations and long-term potential.
Artisan International Value is up 11.7% this year, and has returned an annualized 10% over 15 years, placing it in the top 2% of peers over both periods, according to Morningstar. It has also outperformed the leading international stock indexes. We did a lot of work, and now they’re doing all the work, which is good. They are well along in the process of reinvesting in their brands, in terms of innovation, marketing support, and better relationship management with retailers. We expect that to start to show up in volume growth and operating profitability improvement.
Here, too, the bottom line will grow faster than the top line, resulting in an even more attractive multiple. Once the bad news has passed, the market will revalue the stock to a much higher multiple. The share price has lagged behind as post-Covid inflation has hurt Unilever’s gross margin. Restoration of that margin will require significant prices increases, but volumes will decline. Over time, as wages catch up to broad inflation, brand value will win.
Newsletter Sign-up Semiconductors go through ups and downs, especially memory semiconductors. We’re coming off a period of excess supply. Profits are depressed. On a normalized basis, backing out the cash, Samsung trades at about six times earnings. What is another stock that exemplifies your philosophy of owning good companies that can grow despite inflation?
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