The material contained on Artisan Canvas represents the views and opinions of the authors. Material written by any particular individual may or may not reflect the views and opinions of Artisan Partners or its associates. The material contained on this site may contain forward-looking statements regarding future events and future performance, as well as management’s current expectations, beliefs, plans, estimates, or projections. Forward-looking statements regarding Artisan Partners Asset Management Inc. and its subsidiaries are subject to a number of risks and uncertainties, including those factors described within “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 18, 2020, as such factors may be updated from time to time. The views and opinions expressed in this material are based on market conditions as of the date indicated and are subject to change without notice. While this information is believed to be reliable, there is no guarantee to the accuracy or completeness of any statement in the discussion.
This website does not constitute an offer or recommendation by Artisan Partners of securities or services to, or a solicitation by Artisan Partners of an offer of services or to buy, sell or hold securities. Artisan Partners and the authors noted herein may have financial interests, through investment vehicles or personal investments, in any themes, trends, companies or securities discussed. Materials on this website are informational only and should not be taken as investment recommendation or advice of any kind whatsoever (whether impartial or otherwise). Investing is subject to risks, which include the potential for fluctuations in investment value and loss of principal. Past performance is not indicative of future results.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. The herein referenced S&P index(es) ("Index") is a product of S&P Dow Jones Indices LLC ("S&P DJI") and/or its affiliates and has been licensed for use. Copyright © 2021 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). None of S&P DJI, Dow Jones, their affiliates or third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Source ICE Data Indices, LLC, used with permission. ICE Data Indices, LLC permits use of the ICE BofAML indices and related data on an "as is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Artisan Partners or any of its products or services.
© 2021 Artisan Partners. All rights reserved.
Was Sisyphus a Value Investor?
“I leave Sisyphus at the foot of the mountain! One always finds one's burden again. But Sisyphus teaches the higher fidelity that negates the gods and raises rocks. He too concludes that all is well. This universe henceforth without a master seems to him neither sterile nor futile. Each atom of that stone, each mineral flake of that night filled mountain, in itself forms a world. The struggle itself toward the heights is enough to fill a man's heart. One must imagine Sisyphus happy.” —Albert Camus, The Myth of Sisyphus, 1942
The plight of Sisyphus is not wholly unfamiliar to value investors. And so it’s reasonable for these investors to ask themselves: Are we like Sisyphus?
Understated Outcomes of an Evolving Covenant Environment
The pandemic’s financial toll has been widespread, but a surprising silver lining has been the relatively short-lived corporate default wave. Default volumes were certainly elevated throughout 2020 but steadily declined over the last several months as risk-seeking capital rushed to meet companies’ liquidity shortfalls. Even more notable, defaults have been relatively rare among COVID-impacted businesses, with most default activity occurring in areas already struggling before the pandemic—not because of it.
Potential Implications of a Wider Chinese Stock Blacklist
In November 2020, US President Donald Trump signed an executive order prohibiting US investors from investing in a group of Chinese companies. The targeted companies are believed to supply and/or support China’s military. Subsequently, there have been media reports of the US government potentially adding companies to the blacklist. Most recently, media reports indicated the US government was considering adding Alibaba and Tencent.
The Peaceful Transition of Power?
With the US election almost officially behind us, it’s an opportune time to discuss politics. Ha! Just kidding. Let’s talk value stocks, which peacefully assumed power on November 9, 2020, with Pfizer’s vaccine announcement.
Perspectives on the Trend Toward Stakeholder Capitalism
Beginning in the 1970s, Milton Friedman and his economist colleagues at the University of Chicago successfully steered private enterprises to prioritize the pursuit of profits as their sole social responsibility. While we will not venture to agree or disagree here, several forces are seemingly working together to shift this mindset. Though still in its infancy, our research and work on ESG for the past two years suggest a more balanced “stakeholder primacy” is taking hold.
The Spread of E-Commerce Accelerates in the Pandemic
Featured Author: Jessica Lin
Jessica Lin is an analyst on the Artisan Partners Sustainable Emerging Markets Team.
E-commerce was growing markedly faster than overall retail sales before COVID-19, especially in EM. But the global response to COVID-19—drastic containment measures and cautious economic reopenings—led to a surge in online shopping fueled largely by millions of consumers shopping online for the first time. China’s Alibaba reported an increase of 28 million mobile active users in Q2, while Latin American e-commerce company MercadoLibre reported 16 million new active users during the quarter.
Value Versus YOLO
The pandemic has accelerated secular trends—such as the shifts to e-commerce and digital payments, social media’s dominance of advertising spend and the rise of gaming. It’s also intensifying normal cyclical fluctuations, pulling forward home improvement projects and pressuring retailers—particularly those reliant on shopping mall locations—to declare bankruptcy. None of this is terribly surprising. More likely to catch market participants’ eyes, the combination of COVID-19 and social media is amplifying the oldest cyclical phenomenon known to mankind: greed!
Market Rally Met With Narrowing Leadership
Active, bottom-up oriented investors can be caught flat-footed by unforeseen bouts of volatility—indeed, 2020 has already seen several unprecedented selloffs and remarkable recoveries. However, a bottom-up approach needn’t preclude using tools to help identify and, to the extent possible, mitigate the portfolio risks associated with meaningful market reversals. Admittedly, market unwinds will likely never be entirely foreseeable. But we believe it is possible to anticipate periods where the risk of a market reversal is high—and as active managers, to then reevaluate the risk-return tradeoff for portfolio holdings with material unwind risk.
The Importance of Profit Growth in Equity Returns
There is frequent debate among market participants about which style factors will be in favor in the future: growth, value, momentum, active, passive, etc. While we do not possess the ability to pinpoint the timing of when one style may be in favor over another, we believe the key element in determining the future path of a share price over the duration of an economic cycle is highly dependent on knowing which way profits are headed.
Emerging Markets Case Study: India Amid COVID-19
Featured Author: Gurpreet Pal
Gurpreet Pal is an analyst on the Artisan Partners Sustainable Emerging Markets Team.
As the COVID-19 pandemic evolves, emerging markets are set to take center stage. The US, Italy and other developed markets appear to be flattening the curve and starting to reopen their economies. In comparison, many emerging markets appear to be in much earlier phases of an outbreak. Within EM, India is an especially intriguing country to watch as it seems to be managing the pandemic better than previously feared.
India has the seemingly right conditions for a high number of cases and rapid transmission: