Fear continues to pervade the world’s stock markets, in spite of a constant flow of new rescue packages. Future prospects appear uncertain. What is the status of the companies in SKAGEN’s portfolios and what is the outlook for investors?

SKAGEN’s portfolio managers answered your questions.

Question: Vietnam?

This is directed at Mr. Stensrud: Dear Mr. Stensrud, Do you see any opportunities in Vietnam? The country looks (at least to me) very well positioned with a young, "hungry" and well-educated population, with a government (although still "communist") that seems to be determined to lay the ground for a stable economic development (last year they entered the WTO) and with a huge and fast developing neighbor like China. I'm a bit surprised that the Kon-Tiki fund is not yet invested in Vietnam. Am I wrong with my expectations regarding this country? Thank you in advance for your answer!

Sent by:  Anon

Answer:

Dear Sir,
You are right that we have not yet invested in Vietnam and the country is definitely interesting, also after a more than 60% decline in stock prices there this year. We have looked at several companies there but not yet invested. In the short, the country is facing some credit issues. We’ll continue to look at opportunities.
Regards
Knut Harald Nilsson, co manager of SKAGEN Kon-Tiki

Question: When to invest in shares?

We all know that shares are cheap, however, if we enter a deep and long recession then shares can get even cheaper. So when would you think it is the right time to enter the market?

Sent by: Niels Nielsen

Answer:

Hi Niels,
If you can tolerate risk and have a time horizon of at least 3-5 years I think this autumn is a great time to invest. Do not have ambitions to perfect market timing, but go bottomfishing at rainy days. 
Kristian Falnes

Question: P/E and other ratios

In your status report, I read the following : The ten largest companies in the portfolio, which constitute 46% of the total value, were at the end of October traded at a median P/E of 7.6x for 2008e versus 11.8x a year ago. Correspondingly, the current median P/B is now 1.1x versus 2.2x a year ago. However are the P/E and other ratios updated to what we believe now are a good estimation of these values?

Sent by: P. van Duijn

Answer:

Hello P. van Duijn,
Yes, the estimates you see in the Global status report are continuously updated as of the publishing date of the report and were as of Oct 31 our estimates. Two things to point out – 1) the comparison is of the top ten positions and these position change throughout the year when we find value in alternatives. 2) The third quarter earnings season (like all company reporting) is upon us which might affect the estimates pending new developments, both positive but in today’s environment more negative.

But again, these are our estimates as we now read the company progressions.
Filip Weintraub

Question: China

I am surprised about the ongoing fall of Chinese shares. It seems that the financial world is expecting a major crisis in China too, although growth rates seem to above 5%. This also seems to be the case for the other developing countries. What will you do with Kontiki in case the emerging markets do not perform as we all hoped a few months ago and the scenario of a scenario of economic decline happens after all?

Sent by: Loek

Answer:

Dear Loek.
Developing economies are not sheltered from the industrialised world, but continue to grow at a rate well above countries in the west, with an expected growth of 5% for 2009 when all major western countries are expected to enter a recession. The key to this is the fact that these countries are clearly less indebted than in the western world which consumers and companies also showing financial strength well ahead of western consumers and enterprises. Thus, consumers and banks in developing countries will not be forced through the painful process of radical deleveraging we will experience in many developed countries. Regarding Chinese stocks, we have for a longer rime found them to be overvalued. However, now we are starting to see great value in some smaller and medium sized companies. Among the large cap companies, however, it is more difficult to find value. What we have done in the portfolio in recent months is to reduce weighting towards capex oriented companies as well as companies with uncomfortable financial gearing. We have increased our weighting in banks with no exposure to western economies. I agree that the significant fall in emerging market equities imply that the situation here will be equally worse than in developed countries, which we disagree. As you see above, we believe the absence of leveraging is the key to a continuous relatively strong economic growth in emerging markets which should eventually impact corporate profits and stock prices.
Knut Harald