December 18, 2007
International markets- both developed and emerging- are becoming more and more of interest to investors in the US. David Heller of Advisory Research talked to us a little bit about the problem areas and potential challenges in international investing:
- I think that the largest challenge is the trading of the stocks. This is not a frictionless market. Smaller companies can have bid/ask spreads that are 3% or 4% wide. So you are starting at a disadvantage of 300 or 400 basis points when you go to buy and sell.
- Another challenge is the extent of cultural differences that are prevalent with management teams around the world. What could be an ideal investment decision in Hong Kong may be very different in Australia or vice versa. We spend a lot of time getting to know the qualitative aspects of
management’s approach to their business as well as their capabilities and motivation.
- Finally, when you research a US company, you are talking to a Chief Executive Officer in the same language. When you are conducting management interviews through an interpreter, a lot can be lost. Subtle nuances can be the key to an investment buy or sell decision. Because our team can converse effectively in many languages, we believe that these subtle nuances are not lost to us.
For the full investment strategy issue, including both domestic and international investment strategy tips and stock picks, click here.
