Brent Lynn has beaten 96 percent of rivals since taking over the Janus Overseas Fund in 2003, in part by investing in stocks from emerging markets such as India and Brazil.
Now, Lynn is finding attractive bets closer to home. Delta Air Lines Inc., Ford Motor Co. and Bank of America Corp. were top 10 holdings as of Sept. 30 at the $13 billion mutual fund, which more than doubled its weighting in U.S. stocks in the past three years while cutting emerging-market holdings by a third.
“Some of the best investing opportunities may be in the developed markets of the United States and Europe,” Lynn said in a telephone interview from Denver, where Janus Capital Group Inc. is based. “Growth may not be as exciting as it is in some emerging countries, but there are interesting things going on under the surface.”
Investors have poured cash into emerging-market equity funds at a record rate in the past two years, lured by fast-growing economies in Asia and Latin America and consumers and governments free of the debt burdens faced by their counterparts in the U.S., Europe or Japan. Lynn is one of a growing number of money managers who say the rush into emerging-market stocks has driven up their prices to the point where it’s hard to find bargains.
“Investors in general have a very favorable view of those markets,” Lynn said.
“The emerging-market story is as great as it has ever been, but the prices you are being asked to pay to participate are increasingly full,” said Simon Hallett, chief investment officer at Harding Loevner LP in Somerville, N.J., whose $10 billion in assets under management include $4 billion in equities in developing countries.
Hallett shifted money into multinational companies, such as Vevey, Switzerland-based foodmaker Nestle SA, as a way to capture some of the benefit of emerging-market growth at a lower price, he said in a telephone interview.
“Emerging markets aren’t a secret,” Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said in a telephone interview. Ablin, who called the stock prices “stretched,” helps oversee more than $55 billion.
Jeremy Grantham, the often-bearish chief investment strategist at Grantham, Mayo, Van Otterloo & Co., referred to the popularity of emerging-market stocks in his quarterly newsletter published Oct. 26. “Everyone and his dog are now overweight in emerging equities.”
