Fund manager ‘nibbles’ on international stocks hurt amid crises in Turkey, Argentina Deep Dive

Bloomberg

Genco Shipping & Trading is among several transportation companies held by the Evermore Global Value Fund.

A fund manager who specializes in profiting from corporate restructuring and turnarounds said there’s a silver lining when international stock markets are disrupted by the types of events occurring in Turkey and Argentina, as well as the fear of tariffs and trade wars between the U.S. and other countries.

David Marcus is the CEO of Evermore Global Advisors of Summit, N.J., which has about $1.3 billion in assets under management, including $687 million in the Evermore Global Value Fund /zigman2/quotes/200165874/realtime EVGBX -0.77% and money managed for institutional clients. The fund is rated four stars (out of five) by Morningstar and seeks to buy shares of companies undergoing a transformation, including restructuring and spin-offs, as well as value plays that become more compelling during periods of uncertainty.

Here’s the fund’s geographic breakdown as of June 30:

Three examples of opportunity amid crises

When discussing the currency crises in Turkey and Argentina in an interview on Aug. 14, Marcus said people are often overly fearful that contagion will spread and that “these kinds of bad runs in the market are good for investors who are not using short-term thinking but take the long-term view.”

One example of a stock that might be overly punished by the spreading of market fear is Codere S.A. , which is headquartered in Spain and runs gambling machines and facilities.

“Argentina is their biggest market,” Marcus said. The Evermore Global Value Fund has held shares of Codere for about a year and a half, and the obvious fear of sliding sales in Argentina in the short term might enable Marcus to “use this kind of a stressful market environment to add to our positions.”

Marcus then pointed to another industry that many investors continue to shy away from: shipping. This industry is still recovering from the disruption caused by a glut of capacity that was brought online just when the movement of goods into and out of China slowed during 2016. And now, the brewing trade war with China sets up opportunities for Marcus to “nibble” on shares of shipping companies that the fund already owns. Those include two small-cap companies — Scorpio Bulkers and Genco Shipping & Trading /zigman2/quotes/200735795/composite GNK -1.04% .

Marcus said the fund holds about 7% of Scorpio’s and 4.5% of Genco’s shares.

He said “shipping companies can actually have a benefit from tariffs.” For example, if China decided to import soy beans from Latin America instead of from the U.S., the total amount of ton-miles of shipping would increase.

Marcus believes too many investors are looking back at the problems of the global shipping industry, instead of looking ahead.

“The day rates charged for shipping are ticking up very nicely. Demand is starting to grow,” he said, adding that “there is a rational thinking process going on because so many of these investors were burned.”