Mark Mobius is the authority on frontier markets, the “
emerging markets of the future.”
As executive chairman of Templeton Emerging Markets Group, Mobius spends 250 – 300 days a year travelling to economic final frontier.
Business Insider caught up with Mobius while he was out in Georgia, a tiny country that connects Western Asia and Eastern Europe.
We asked him what he looks for in a frontier or emerging market investment, and what he learned from his visit to Georgia.
Business Insider: What are the best sign that an investment will do well in an emerging market or frontier market?
Mark Mobius: The first and foremost sign is growth. Economic growth drives company growth and profitability, and that is thus what we want to see when investing. We look for well managed companies who are capable of taking advantage of the country’s economic growth.
BI: What’s on your must-do list when you visit a country for the purposes of analysing it as an investment?
MM: The must-do list includes first visiting the companies in which we are interested and meeting the management. Then we want to talk to the companies’ customers and competitors. Lastly, we speak with government officials who are involved in regulating and monitoring the businesses in which we intend to invest.
BI: What are the big red flags that give you pause?
MM: High turnover of top personnel of a company is usually not a good sign, particularly if there is a departure of the Finance Director. Also a high debt situation with cash flow being used more and more to pay debt and interest. Then sales growth is important, and if sales are not rising then that is a bad sign.
BI: What’s one question you ask every dignitary or politician you meet when you visit a new country?
MM: What reforms are you undertaking to reduce corruption? What plans do you have to grow the economy and reduce taxation while making government more efficient?
BI: What drew you to Georgia?
MM: The fact that the country has undergone a transformation towards a modern and fair society where citizens are treated properly by their government.
BI: Could you give us an example of something you learned speaking to locals in Georgia?
MM: The most impressive point I learned was how much the old ways had been discarded and the government had become more efficient. Most important has been the reduction of corruption.
BI: What risks should investors be aware of when considering Georgia?
MM: Like in any country there are revisionists in Georgia who want to go back to the old ways. Also, like other countries there still is corruption. So these are problems we should be aware of. In addition, we must watch relations with Russia to ensure they remain on an even keel.
Mobius sent us photos from his recent trip to Georgia.