While the U.S. economy remains sluggish, growth is rebounding in much of the rest of the world. That is creating plenty of opportunities for Laurent Saltiel, portfolio manager of Janus Worldwide (JAWWX) and Janus International Equity (JAIEX).
Saltiel aims to find companies that can grow at double-digit rates for the next three to five years. “We are finding much more exciting growth companies outside the U.S.,” Saltiel says. “You can get higher growth and lower valuations in Europe and the emerging markets.”
Speaking yesterday during an interview at Registered Rep.’s New York office, Saltiel said that he is particularly keen on the emerging markets of Latin America and Asia. While exports to the U.S. have softened, many countries continue reporting strong growth because of booming domestic economies. With millions of consumers leaving impoverished villages to join the urban middle classes, retail sales are climbing. Banks in the developing world remain on sound footing, since they avoided the toxic assets that have unhinged U.S. institutions.
A favorite Janus holding is HDFC Bank (HDB), an Indian lender. In the past, Indians typically paid cash to buy houses. But these days more home buyers are rushing to take mortgages. That should enable HDFC to increase earnings at a 20 percent annual rate for the next five years, says Saltiel. To limit risk, the bank typically makes loans for only half the value of a house.
“This business is less risky than a lot of the British banks,” says Saltiel.
Janus has more than 8 percent of assets in tobacco stocks. Those are growing rapidly in the emerging markets. A big holding is British American Tobacco (BTI). Though the company is domiciled in the U.K., most of its sales come from India and other emerging markets. “Tobacco is a very defensive industry because consumption is resilient,” says Saltiel.
The Janus portfolio manager is also finding strong growth in health care companies. Even in countries that have been hurt by the global recession, demand is expanding for pharmaceuticals. Saltiel likes Novo Nordisk (NVO), a Danish producer of insulin and products that are used to treat diabetes. He says that diabetes is one of the fastest-growing diseases in the world. The disease is spreading in the U.S. and Europe, as well as China and Japan. That should enable the Danish company to increase its earnings at a 10 percent annual rate for years to come.
To limit risk, Saltiel sticks with high-quality companies selling at reasonable prices. Saltiel avoids frontier markets, fledgling economies—such as Nigeria and Egypt—that have yet to develop solid middle classes. The emphasis on risk control has paid dividends during the difficult markets of recent years. During the downturn that lasted from November 2007 to March 2009, Janus International outperformed the average large growth foreign fund by 4 percentage points. The fund also outpaced peers in the recent rebound.
Saltiel has been at the helm of Janus International since its inception in 2006; at Janus Worldwide, he replaced Jason Yee, a value-ish manager who underperformed badly for five years, in April of this year.
Saltiel says that his careful approach has helped the fund stay ahead. “We are not just buying the fastest growers,” he says. “We are trying to find quality companies that can do well in up and down markets.”