Good governance matters when you’re Unilever (PER 15x, yield 4.0%), an Emerging Middle Class theme holding. Reading an interview with its CEO in the Gulf Times on a trip to Abu Dhabi, I marvel at its targets for social responsibility. By 2020, Unilever will improve the hygiene habits of 1bn, bring safe drinking water to 500mn, halve its environmental footprint, halve waste, cut paper usage by 30% in 21 countries, source 100% of its agricultural inputs "sustainably". Now that most socialized governments are discredited or bust, it’s left to capitalist autonomies like Unilever to make the world a better place. At least they’ll be believed when they open their mouths.

"Bliss was it in that dawn to be alive, But to be young was very heaven!" wrote William Wordsworth of the French Revolution. But Mary Meeker, dubbed the "Queen of the Net", writes in her "Internet Trends" of a revolution more viral than France’s, one that affects young and old alike. The agents of change are not guillotine and social pamphleteer (Tom Paine), but Smartphone (Steve Jobs) and social network. Meeker makes us feel warm n’fuzzy about our holdings in Google (the dominant internet stock on only 13.8x PER) and Vodafone (PER 11x, Yield 7.7%, a quality beneficiary of increasing Smartphone volumes). A few sound bites. In 3 years, China has added more internet users than now exist in the USA (Nigeria, Russia, India and Iran are also going on-line in size). The internet is growing at +13% pa but connects only 30% of the world. The most active social networking countries are Israel ("Will you be my friend?"), Argentina ("Ola Diego, did you really score that goal?") and Turkey ("Did you hear the one about the Frenchman, the German and the Greek?"). Facebook (with 800mn fans, now more followed than the internet in 2005) derives 1/3 of traffic from mobile phones (from zero 3 years ago). Twitter gets 55% of its business from mobile users, and they all sit next to me on my bus. Google’s US mobile queries have grown by 4 times in 2 years, its gross advertising revenues are zipping along at +33% yoy and its paid clicks are multiplying at +28% yoy. Worldwide, Smart phones are spreading at +35% yoy but penetration is still a piddling 17%. The fastest growers are populous, busy places like China (+172% yoy), Brazil (+79%), Turkey (+104%) and India (+1050%; yes +1050%). Statistic of the year: did you know that 200mn Indian farmers receive their government subsidies via their mobile devices? There are only 835mn Smartphone users but 5.6bn mobile subscribers, so it’s early days for Smartphone-geekery. In the 2-horse races for devices, Google (152mn) has shipped more Smartphones than Apple (129mn) and, ominously, is somewhat cheaper. Apple’s iPad (29mn devices) is pipping Amazon’s Kindle (16mn); but Kindles are a third of the price of iPads. An Apple a day may not keep the doctor away for much longer.

Investors, in case you haven’t noticed, are at their most bearish in 5 years. Shares borrowed by sentimental, caring folk like the hedge fund community climbed to 11.6% of all available stock in September from 9.5% in July, the biggest increase since 2006. Trades that profit when Chinese shares fall have reached a 4 year high and bearish bets on the USA are the highest since, yes, March 2009, the bottom of the market. The MSCI All-Country World Index trades at 11.8x reported profit, versus 11.9x after Lehman’s collapse. The average since 1995 is 21x.

Big Oil matters Big Time. Abundant oil is an Angel of Mercy to the double-dipping consumer. So it matters that Libya’s doomsayers are wrong. Libya’s oil production is recovering more quickly than forecast. Thus spake the head of Libya’s National Oil Company. Exports, he said, will surge within a couple of weeks and pre-war output of 1.6mn barrels a day (b/d) will come within 14 months (1mn within 5). Oil production has already reached 0.35mn b/d and 90% of oilfields are little damaged. NOC vows to be transparent in future, so analysts will read the tea-leaves more easily. No doubt OPEC will mutter darkly about reducing output, but oil demand has cooled and there are always classroom cheats when money is to be made. Our Libyan beneficiaries (Energy and Alternative Energy theme) are ConocoPhillips (PER 10x, yield 4.4%), ENI (PER 9x, yield 6.3%) and Total (PER 7x, yield 7.5%).

This year, our global growth equity portfolios are nearly 15% behind global Dividend Aristocrat equity portfolios. Many stocks with +15% earnings growth are 50% off their highs. Food for thought for the uninvested.


This diary (the "diary") is published by Global Thematic Investors Limited, a company domiciled in Hong Kong and incorporated under the Hong Kong Companies’ Ordinance on the 15th September, 2005. The diary is not intended for private customers and is written to be read solely by sophisticated investors, such as family offices, business corporations, banks and financial intermediaries. Statements are completely personal and may change without notice, are often forward-looking and therefore subject to uncertainty and risk. The predictions and forecasts implied may not subsequently be achieved. The diary is composed of information and opinion believed to be accurate, though this information may not have been verified. Funds or collective vehicles may only be open to certain persons in certain jurisdictions and may follow strategies that are speculative and involve a high risk of loss and may go up as well as down (a favorable performance record is no indication of future performance).