Don’t Overthink It: Gross Profitability Matters In Emerging Markets

Profitability should be a key focus for investors seeking investment in emerging market equities, notes PIMCO in its recent research report.

PIMCO analysts led by Masha Gordon analyzed the performance of a quality investment style that consists of systematically overweighting stocks that display high profitability.

Profitable firms outperformed in developed markets

PIMCO analysts point out that empirical evidence has so far focused on developed markets, particularly the U.S. The empirical evidence corroborates the view that in these developed markets, profitable firms tend to consistently outperform unprofitable ones.

The analysts point out that profitable firms tend to remain profitable over time, and this phenomenon is as true in emerging markets as it is in developed markets.

Gross profitability attracts premium in Emerging Market equities

PIMCO...