Value Investing In Russia And Other Emerging Markets

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Axel Krohne is the head of the San Diego based firm Krohne Capital. There he is managing a fund with focus on emerging markets.

In this interview we mentioned the following:

  • At the beginning Axel explained why is he not investing in India and China
  • At 01:18 we are talking about the return he expects
  • At 02:22 we took a deeper look in the fund and talked about the question, if Russia is investiable
  • At 04:04 we talked about banks in Russia
  • And at 05:00 we covered banks in Africa
  • At 06:50 Axel Krohne explains why he is just buying the top banks.
  • At 07:37 he gives insights in the state of stock exchanges and the investing culture in Africa
  • At 09:40 he tells more about trading in developing countries, like Ghana
  • At 11:12 he explains his criterias to invest in a company
  • At 14:15 he is talking about dividends in the investing process
  • At 15:04 we asked him: Is there a culture of buybacks?
  • At 15:45 we discussed if there is activism
  • At 16:27 we talked about currencies
  • At 18:04 we took a look at the research process
  • At 20:06 we talked about the coverage of his stocks
  • At 21:29 we ended with a talk about the holding period of his stocks

Risky Roulette Or Rich Returns? Axel Krohne On Value Investing In Russia And Other Emerging Markets


Hello Axel. Welcome to the valueDACH YouTube channel. You’re an emerging market value investor but you don’t invest in China or India. Why is that so?

Thank you very much for that question. I. Like to prefer I mean I’m for investing in markets that are easier to understand. And I’ve been to China I’ve been to India and both of them obviously huge country for massive populations and a lot of simultaneous competitive forces that I just don’t get it can get a grasp.

I just feel too much of an outsider.

On top of that in China particularly too many frauds have been going on that I don’t trust most companies books and therefore I avoid them in your fund.

What kind of your time do you expect. I don’t.

Have expectations for the fund however for every individual stock that I’m buying I expect at least to double my money.

And it’s not that I succeed with that all the time. But. I think I have to have a few companies that do very well a few stocks that do very well in order to make up for losses. So the stock has 10 20 30 percent upside in my mind.

I would not I would not touch it. It’s not enough.

Look at bit deeper in your fund. You are investing in countries like Russia, Nigeria, Egypt, Ghana and also in Asia and some countries Vietnam for instance. But take a look at Russia. A country where people say it’s not impossible. What’s your opinion on it.

I see. I totally disagree. I think it is very good Festival and I’ve seen many great companies make great businesses attractive stocks.

And many of those companies are managed for the benefit of their shareholders. And that’s all that elders including the minority shareholders.

And not they’re not run by the Kremlin. So I like Russia at the right price. Can you name some companies in Russian who like the certainly buy one company that comes to mind one of the biggest holdings is novel whisky ports.

Trades in the in Russia.

Moscow quite actively quite liquid. It’s not very investable for Germany Frankfurt by that support all the way.

And MGP is a symbol and the stock’s trading at the very attractive valuations at the port. Business is it quazi monopoly and this stock has bought north of 20 percent free cash flow yield derivative you to 7 8 percent 6 or so and that’s a company I would buy.

Day in day out bought that much more valuation but even at this appreciated prices I think it’s still attractive. We used to own the Moscow Exchange which runs the stock exchange a Moscow monopoly business not growing tremendously but still fantastic business.

And that I like a lot. What’s your opinion on banks in Russia. I like him. I like I like Spevak.

I think that’s a great business it’s a great man highly profitable bank in terms of return on equity and the stock is cheap. We currently own Bank of some book in the ABH fund and that’s as well.

In not as good a business because we chose equities pretty lol it’s the T high single digits 8 9 percent or so but then you’ve got to stop that trade at three times earnings 70 percent discount to book value. So I think it’s a very attractive stock that is one off site.

Without anything really good has to happen. It’s priced it’s a major crisis but there’s not. They just recorded record profits the last quarter.

Length in the financial sector but go to Africa having to take a look at the financial sector here and banks here like banks there to.

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