One of the most frequent questions we are asked as fund managers is: ‘There are plenty of emerging market funds that are all looking for the best 50 stocks in the region, so what is different about Polar Capital Emerging Market Stars?’. Here is our answer.

Going further on EVA

Economic Value Added (EVA) is generated when a company’s ROIC exceeds its WACC, when its returns are greater than its cost of capital. It is really the only way that companies create long-term value for shareholders, so for that reason our team focuses fanatically on analysing and understanding the inputs into sustainable EVA over the long term.

The system the team has developed seeks to establish the real drivers of returns for each investment, how they may change over time, how and why they differ from peer group averages and, ultimately, how sustainable they are. Specific details are dovetailed with a bigger-picture view on how returns are achieved, in order to cut through the misrepresentations and short-term noise of accounting metrics.

We score all companies on the 12 factors in our EVA wheel below. Each of these elements is directly related to a business’s long-term, financial, returns-generating ability and is equally part of this whole, interconnected system that we analyse together.

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