The way Pines sees it, valuation is critical and he avoids paying up for popular stocks, even high-quality ones. Giving a simple analogy, he says: “If we can’t find a $50,000 Ferrari, we’d rather buy a $5,000 Ford.” This refers to the fund’s strategy of investing in less glamorous stocks that are trading at a compelling discount, rather than investing in the big names that are trading at a premium.
Jonathan Pines, lead portfolio manager for the Federated Hermes Asia ex-Japan Equity Fund, believes the region is poised to outperform developed markets as low valuations converge with improving fundamentals, particularly in China and South Korea. Despite market volatility and style rotations, his fund adheres to a long-term, value-focused strategy designed to identify mispriced equities with strong upside potential.
At the heart of Pines’ approach is a bottom-up, contrarian discipline. “We require a 15% internal rate of return from buying, holding and then selling a stock,” he says. In practice, this means targeting companies that can realistically double in value over five years — either through earnings growth, valuation re-rating or both.
