Andrew Cormie, emerging-market veteran at Eastspring Investments, is no stranger to market uncertainty.
Now chief portfolio manager at one of Asia’s biggest asset managers, Cormie was only five years in the financial industry when stocks came plunging down during the Black Monday Crash in October 1987. But instead of being spooked out of the trade, Cormie pushed ahead and turned the market meltdown into a life-lesson for investing: Look for the buying opportunities and never give up on your strategy.
A little more than a decade later, he used that philosophy to steer through the dot-com bubble as global equity chief at J.P. Morgan Investment Management in London. In 2008, he joined Eastspring Investments in Singapore, with $146 billion in assets under management, where he now heads the global emerging-markets team.
MarketWatch spoke to Cormie as part of a series on how veteran investors are adapting to today’s uncertain political landscape, where a tweet from U.S. President Donald Trump is only one of the things now jolting stocks on a regular basis. Here’s the edited interview:
How should investors behave with this heightened level of political uncertainty?
My experience tells me very strongly that in times of uncertainty, and when you are unsure what the future looks like, it’s critical that you focus on what you believe in as an investor and what your investment philosophy is.
And while you do that, think about the two/three things that give you a competitive edge compared with everybody else in the market.
Don’t get caught up in the emotion. If you abandon what you believe in and what you are good at to follow emotions along with everyone else, you are more likely to be a loser than a winner.
Read: I drove myself crazy by investing $3 in the stock market
“Don’t get caught in the noise and try to be something that you are not.”
Do you find investors with less experience are more likely to get caught up in the emotion?
Yes, we see that in the market every day. People like to think they can forecast what happens next in the short term, or they think there’s an opportunity for them to step away from what they believe in and chase quick profits. That’s when you see prices move to silly levels either way, and it creates opportunities for people who are disciplined.
So be very clear at what you are good at — what is your edge and competitive advantage, and focus on implementing that. Don’t get caught in the noise and try to be something that you are not.
You’ve experienced several market crashes. What have you learned from that?
I was pretty junior, but I was managing money in October 1987 in the Black Monday crash. When you look back at the price performance charts now, it just looks like a little blip. But on the day it happened, it didn’t feel like a blip. So a key lesson is being able to put things in context and remember how emotional people were at the time. Now, with the benefit of years and decades looking back, it was a great buying opportunity.
Read: How investors can learn to stop worrying and love a stock-market correction
Similarly with the tech bubble in the early 2000s. At that stage, I was a bit more senior and managing a lot of money for clients. As technology valuations got very expensive, we stayed true to our process and weren’t investing in a lot of the stocks that were performing very well. That was causing us some pain and underperformance, and there were times when clients were getting quite frustrated.
But we stayed true to our philosophy and our process, and when the market changed, it changed violently and quickly, and the people who had chased performance got very badly burned. We made back everything that we’d lost and more, in terms of performance, by sticking to our disciplines.
U.S. stock markets are trading around record highs. Do you think people are being too emotional and optimistic at this point?
From a distance, U.S. markets look expensive. There are other markets, like emerging markets, that look substantially cheaper, but also are more risky. So if we focus on valuations, we wouldn’t be telling clients to increase their exposure to the U.S., but look at having a diversified portfolio.
Whether it’s a security or market that you find attractive, the key is to make sure that you have conviction in the work that you’ve done and understand where you think the value is.
Once you’ve figured out the margin of safety, and you believe you’re being paid for taking the risk, that’s the point where we try very hard to have the courage to step into the market — even if it feels uncomfortable and other people are telling us we are silly to put that investment into the portfolio. If it was easy, we’d all be making a lot of money.
Read: Charting the U.S. stock markets’ bearish near-term technical tilt
Do you have any experiences that stand out to you as particularly good or bad?
When I started covering emerging markets in the 1990s, I went with an analyst to visit a company that was fishing for tuna. We met with the chairman of the company, and he told us what bright prospects they had for the future, and it was a very optimistic meeting. That was on a Wednesday.
By the time I had gotten back to London on the following Monday, they had announced their earnings, and they were very, very poor. So I talked to the analyst, and said: “What is going on? Why don’t we ring the chairman and ask him what’s going on, since he told us such an optimistic story?”
So we got hold of the chairman, and he said since we met it had become obvious to management that this quarter, the tuna was swimming deeper than usual and it was costing them more money to catch them. And that was the cause of their poor profit results.
The next 10 years, whenever we went to a company meeting and thought someone was lying to us, we looked at each other and everyone just said “deep tuna.” That was our secret code if we thought the company was lying to us. The lesson is, you really need to double-check everything.