International equity fundamentals show improvement

As our strategy turns 25, we discuss the keys to our EQV philosophy

This year marks the 25th anniversary of Invesco International Growth Fund. In that time, we’ve seen the performance pendulum swing widely across global regions and investment styles. But no matter the market conditions, our focus on EQV — Earnings, Quality and Valuation — has remained constant.

To kick off our 25th year, most international markets had strong performance in the first quarter, driven by an improving macroeconomic backdrop overseas and a weakening US dollar. Importantly, as we look at the markets through our EQV perspective, we have seen some encouraging changes:

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International stocks: What do earnings, quality and valuation tell us?

2017 Investment Outlook series

Olsson_Clas_se_150dpi_RGB_jpgAs we look toward 2017, the general near-term outlook for international equities continues to appear somewhat mixed, given a combination of global macroeconomic risks. In our view, some of the larger risks include possible instability relating to Brexit and the eurozone, deleveraging in the largest emerging markets, and uncertainty created by the recent US presidential election as well as upcoming elections in Germany and France.

But no matter if the equity outlook is positive, negative or mixed, the Invesco International and Global Growth team takes a bottom-up view of investment opportunities — assessing companies by their Earnings, Quality and Valuation (EQV) characteristics. Below, I discuss the trends that we’re seeing, and how those look through our EQV lens.

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International growth stocks: Searching for opportunities after Brexit

In the post-vote aftermath, and in the longer term, our focus remains on fundamentals

Olsson_Clas_se_150dpi_RGB_jpgWhile the news of the UK’s vote to leave the European Union may have taken many investors off guard, the Invesco International and Global Growth team was prepared to take action in the surprise event of a Brexit vote. In the run-up to the vote, we diligently reviewed our existing holdings and potential investment candidates — not just in the UK and Europe but also in other regions around the world — creating a “watch list” of stocks in anticipation of the potential market dislocation that would likely result from a Brexit decision.

Most portfolios managed by the Invesco International and Global Growth team held cash levels above their historical averages ahead of the vote, enabling us the flexibility to put client money to work should we see distressed selling and opportunity. On June 24, when global markets opened after the news, we made selective purchases in the majority of our portfolios, including

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