By Satish Kanady
DOHA: Fear can create risk, but it can also create opportunities. But investors must realise that which one gives them value and from which one they should stay away, a top US Asset Management expert told bankers and investors here on Monday.
Kick-starting Qatar First Bank’s (QFB) “Knowledge Excellence “series, Nili Gilbert, co-founder and portfolio manager of Matarin Capital Management also advised to diversify portfolios to ensure a sustained returns at this time of ‘fear and greed’.
“We are in an environment of fear. Fear offers you opportunities as well. This kind of environment offers you wider spreads. What we saw during 2011, 2013 and 2014 was a narrow spread, because the opportunities from the risk diminished. But what we are seeing for the past three months is that the spreads are getting wider again. So there are more opportunities, you have to focus on that”, she said.
On overweight on specific sectors, Nili said: “There are definitely wide spread between certain sectors. At Matarin Capital, we have specifically some valuation metric that make sense to consider across whole investment universe. If there is a real cash flow, I do not mind overweighting on those sectors.”
“You cannot look at the valuations simply at the metric of sales. For instance, sales of a supermarket may be high but margins will be low. The sales of jewelers may be low but the margins will be definitely higher,” she said.
Nili who said that ‘this time is different’, noted the market was ‘very greedy’ in 2012 and 2013. As a matter of fact in 2013, companies with negative earnings outperformed companies with positive earnings almost by 10-20 percent. Also in 2013, companies that had junk-rated debts outperformed companies that had investment grade debt. Companies that were highly leveraged outperformed companies with lower leverage. “What we are seeing today is just the opposite. During the month of January 2015 we saw the companies whose cash flow was positive outperformed companies whose cash flow was negative over 13 percent in one month. Imagine you do this for 12 months”
This is an environment where risk appetite exists. This is an environment where investors are now saying ‘ show me what you can do right now”.
The Peninsula
