2 minute read
Adirondack Capital
EDMUND LUZINE
CEO, ADIRONDACK CAPITAL
We see tremendous opportunities across the global emerging markets equity sector in 2022, along with substantial headwinds from large risks on the horizon. Those risks include an increase in interest rates in the US, high inflation in major global economies, continued tension with China, and Russian aggression directed at Ukraine that will impact energy and related commodities markets. There are excellent opportunities for value investors in select sectors and nations in the developing world. The 2021 tech crackdown in China will continue to provide smart value investors and traders with alpha generating targets, and economic activity will increase in China after the Year of the Tiger Lunar New Year and post-Olympic travel, as the nation opens up to the rest of the world. The return to the office (RTO) trade combined with a continued reopening of the global economy will spur demand, driven by consumers and global travel. Record air travel at Miami International Airport in November is a leading indicator of future trends in 2022. On a macro level, we have very few concerns over Covid-19 and the pandemic. The increase in deaths in the US was slightly higher than a normal flu season, and economic activity in red states will continue to be robust. There are also select opportunities in the infrastructure sector which supports electric vehicles – charging stations, electrical transmission components, batteries, other storage devices, and select elements, such as lithium, cobalt, and others. We also see value in the re-shoring of trade. As the world recovers and opens up from the pandemic, we expect supply chains to continue to shift out of China – to low-cost areas in Asia, Africa, and especially Mexico, next to America’s economic engine. Our top picks for 2022 and beyond are: the newly formed Canadian Pacific Kansas City Southern Railroad; Naspers of South Africa and its holdings of China’s Tencent; Teck; Teva Pharmaceuticals; Apache and its significant prospects in Suriname; Maxar Technologies; Alibaba; and Yum China. Finally, we have seen demand from investors for more bespoke products – separately managed accounts with strict ESG requirements. We also see institutional investors seeking an increase in the diversity of fund managers from select minority and veteran-owned asset management firms.
We see next year as very rewarding for patient, but aggressive and intelligent investors. 2022 is the Year of the Tiger in Asia. We are already on the prowl!
