Contrarian investing is not simply about buying unpopular assets, but about owning those assets during the recovery process and knowing when to sell. Our holding in Russian equities is a case study of the way these opportunities evolve. Last year Russia was a classic opportunity for a contrarian, offering great value, poor news flow and negative investor sentiment. When purchasing the position we were very confident that value would generate attractive returns.
This has become the most ‘interesting’ of our contrarian positions as many of the key aspects of the original investment case have now changed. Heavy falls in the oil price, the rouble, the intensity of the crisis in Ukraine and associated sanctions, have all reversed to some extent.
As we enter the next phase of the investment journey we have to rely less on compelling metrics and lean more on a nuanced fundamental view.
Neptune Russia and Greater Russia
Morningstar Investment Management invests in this Bronze Rated fund in several of their portfolios. Fund analyst Lena Tsymbaluk says that this fund remains a solid choice within its category, even if its risks were on show in 2014.
“The fund benefits from a seasoned manager with a wealth of experience in Russian equities. Indeed, almost half of Robin Geffen’s 30 years’ experience is in Russian equities. He set up Neptune Investment Management in May 2002 and has since managed a number of the firm’s flagship funds. He receives considerable support from a well-resourced team that is heavily involved in the research process,” says Tsymbaluk.
“The investment approach is based on Neptune’s philosophy, which is a mixture of top-down and bottom-up analysis. The group’s analysts evaluate the key sectors and their growth prospects against the prevailing macroeconomic climate and decide in which sectors to invest. From a bottom-up perspective, the manager aims to identify market leaders with strong earnings, solid competitive position, and efficient capital allocation. Geffen has historically preferred Russia’s domestically oriented sectors, rather than energy.”
