The biggest car-carrying ships on the planet. A chip-testing rig that weighs as much as a small elephant. Investment manager Alex Summers takes us inside some of emerging markets’ least-watched growth companies to explain how his team sees what others have missed. “Often, the crowd is going to be right,” he acknowledges, but when it’s not, long-termism, access to management and asking different questions are key to how his team determines investment opportunities.

Background:

Alex Summers is co-manager of our Emerging Markets Leading Companies Fund, an investment manager in our Emerging Markets Equity Team and a member of the International Growth Portfolio Construction Group.

In this conversation, he tells Short Briefings… host Leo Kelion why one of his team’s guiding principles is that before investing in a company, he and his colleagues must be able to articulate the critical uncertainty about a stock and why others may be wrong.

“Often, you can observe something about a company, and it may be true,” he explains. “But if everybody else believes that, you’re not going to create any additional outperformance by owning those companies.”

Companies discussed include:

Hyundai Glovis – the logistics company that’s invested in a dozen ultra-sized ships and now sees an opportunity in transporting spent electric vehicle batteries

Chroma ATE – the test-equipment company whose customised cabinets provide critical checks for NVIDIA and Nasa

Silergy – the mainland China-based semiconductor company specialising in power-management chips

Reliance Industries – India’s most valuable company and its heavy investment in solar panels, green hydrogen and battery storage systems

Toss – the South Korean financial super-app that provides banking, payment and ecommerce services

Resources:

Baillie Gifford website

Emerging Markets Leading Companies Fund

Emerging markets: from imitators to innovators (video)

Emerging markets: the next engines of global growth

Short Briefings on Long Term Thinking podcast archive

When consensus fails

Companies mentioned include:

· Chroma ATE

· Hyundai Glovis

· Meituan

· NVIDIA

· PB Fintech

· Reliance Industries

· Samsung Electronics

· Silergy

· SK hynix

· Talabat

· Toss

· TSMC

Timecodes (audio version):

00:00 Introduction

01:45 From Toronto to Edinburgh

02:35 A lesser-covered class of companies

03:35 Taking a five-to-10-year view

04:15 Forming non-consensus views

05:35 Hyundai Glovis and EV batteries

07:10 Corporate governance reform in South Korea

09:30 Getting access to senior leaders

11:50 Chroma ATE’s chip-testing equipment

14:50 Building conviction in Silergy

16:30 Declining to invest in Talabat

18:20 Visiting Reliance Industries in Jamnagar

20:45 Retaining sell discipline

22:00 Toss and private companies

24:15 Moving towards physical assets

25:35 Podcasts and Substack picks

Glossary of terms (in order of mention):

Magnificent Seven: A nickname for seven large US technology-related companies – Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla.

Holding period: The length of time an investment is owned.

Corporate governance: The systems and processes by which a company is directed and controlled, including board accountability and the treatment of shareholders.

Minority shareholder: An investor who owns less than a controlling stake in a company and cannot direct it alone.

Bottom-up investing: Assessing individual companies rather than starting with forecasts for economies, markets or sectors.

Economies of scale: Advantages that arise as a company handles more volume, reducing the average cost of each unit.

Profit margin: The proportion of revenue left as profit after costs have been deducted.

Graphics processing unit (GPU): A chip designed to perform many calculations in parallel, originally for graphics but now also widely used in AI.

Analog chip: A semiconductor that processes continuous real-world signals, such as sound, temperature or voltage.

Flotation or initial public offering (IPO): The process by which a private company first offers shares to public investors and lists them on a stock exchange.

Cash flow: The movement of money into and out of a business over time.

Capital allocation: The decisions a company makes about how to use its money, such as investing in growth, making acquisitions, paying dividends or reducing debt.

Business vertical: A distinct business area within a company, usually focused on a particular product, service or market.

Overweight: Holding more of an investment, sector or theme than the index used for a comparison.

Fintech: Technology-driven financial services, such as digital payments, lending or banking tools.

Insurance brokerage: A business that helps customers compare and buy insurance, acting as an intermediary between them and insurers.

Capital-light: Describes a business that needs relatively little investment in physical assets to operate and grow.

Emerging markets: when the crowd gets it wrong

Short Briefings on Long Term Thinking - Baillie Gifford

Emerging markets: when the crowd gets it wrong