Malcolm Dorson 3.1 23 ideas

"We think it might be time to double down... finding it in Latin America... Argentina... Brazil... and Colombia." He cites valuations at a 50% discount to the S&P and high real rates (Brazil overnight rates at 15% with 4.5% inflation). The combination of political reform (Milei in Argentina, upcoming elections in Brazil/Colombia) and the start of a rate-cutting cycle creates a "double whammy" of multiple expansion and currency carry appeal. Long Latin America regional ETFs as a value/cyclical play to complement US Tech exposure. A resurgence in US inflation forcing the Fed to stay hawkish, strengthening the USD (the anti-EM trade).

"Our biggest overweight from a sector perspective is going to be in financials [in Latin America]." As central banks in LatAm cut rates from historic highs, net interest margins may compress slightly, but this is outweighed by improved asset quality, increased loan volumes, and a resurgence in capital markets activity. Long Brazilian/LatAm banks (Tickers listed are the major US-listed Brazilian banks). Policy errors by local central banks or political interference in the banking sector.

"India is a really interesting overlooked place... GDP growth is at 7.8%... Central bank's cutting rates." India underperformed early in the year, making it a "laggard" trade. High local gold ownership (20% of savings) combined with record gold prices creates a massive wealth effect, boosting consumer confidence and domestic spending. Long India broad market ETFs to capture the domestic consumption boom. Valuation concerns (India often trades at a premium) and oil price shocks (India is a net energy importer).

Malcolm notes that the broad EM index is "roughly 80% Asia... [which are] importers of energy." He mentions clients are asking to "monitor this sleeve" via an "EMX China strategy." Standard EM indices (like EEM) are heavily weighted toward China, Taiwan, and Korea. Since these nations import energy, rising oil prices hurt their margins. An "Ex-China" or active strategy avoids this concentration risk and the negative correlation to high oil prices. LONG Emerging Markets Ex-China (proxy ticker EMXC) to avoid the energy-import drag of Asian tech hubs. A resurgence in Chinese growth or a sudden drop in energy prices would make the broad index outperform the Ex-China strategy.

Malcolm explicitly states they are "doubling down" on Latin America, specifically naming "Argentina... the tickers ARGT, Brazil... and Colombia." He notes these markets offer "value, high single-digit PE multiples... and exposure to commodities." The Middle East conflict drives energy and commodity prices higher. While Asian EMs import energy (a negative), Latin American countries are net exporters (a positive). Buying these specific country funds captures the commodity upside and "carry" without the direct geopolitical risk of the Middle East. LONG Latin American single-country ETFs to play the commodity boom and valuation gap. A rapid de-escalation in the Middle East causing oil prices to crash, or specific political instability within LatAm countries.

The speaker explicitly states their "biggest overweight from a sector perspective is going to be in financials" within Latin America. He explains the mechanism: As rates come down from 15%, net interest expenses decrease, asset quality improves (fewer defaults), and capital market activity (IPOs/M&A) picks up. Brazilian banks (ITUB/BBD) are the direct beneficiaries of this specific cycle. LONG Brazilian Banks as a levered play on the falling rate cycle in LATAM. If inflation remains sticky and the Central Bank of Brazil cannot cut rates, the thesis for improved credit quality breaks.

India has underperformed year-to-date, yet GDP is 7.8%, the central bank is cutting rates, and "20 plus percent of household savings lie in gold." With gold prices elevated, Indian households experience a significant "wealth effect," driving consumer confidence "through the roof." This domestic consumption engine, combined with a dip in market performance, creates a tactical entry point. LONG India to capture the disconnect between strong macro fundamentals (consumption + growth) and recent price underperformance. Valuation concerns if the market remains expensive relative to peers; global oil price shocks (India is a net importer).