Unfortunately, this investment is not available for the investor type and location you have selected. Please consider the alternative funds or contact us to explore all your options.
Please confirm that you have read and understand the following terms of use of this website.
You are about to access the pages of Harding Loevner Funds plc, an Irish umbrella type open-ended investment company (the “Company”), which contains information about the Company and its sub-funds (each a “Fund”). These pages are for informational purposes only. It is not investment advice, nor is it intended to be relied on as a forecast or research and does not constitute an offer, recommendation or solicitation to buy or sell shares in any Fund. Access to and the information contained in these pages are restricted to persons who are residents of jurisdictions in which the distribution of the information herein is permitted. Please consult your professional advisers if you have questions about a particular investment or are unsure of the laws and regulations applicable to you.
Investment in any Fund may only be made in accordance with the terms of the relevant offering documents, and subject to the laws and regulations applicable in which the offering documents are distributed. Please further note that not all Funds are available for distribution in all or the same jurisdictions. No information regarding the offering of shares of the Funds is intended for, nor will offers or sales of such shares generally be made to, residents of the United States of America, its territories or possessions. In particular, neither the Funds nor any shares are or will be registered under the U.S. Securities Act of 1933, as amended, the U.S. Investment Company Act of 1940, as amended, or otherwise in the U.S. and may not, except in a transaction which does not violate U.S. securities laws, be directly or indirectly offered or sold in the U.S. or to any U.S. persons.
By clicking on the “I Agree” button below, you acknowledge that you have read and understood this disclaimer and wish to proceed to these pages.
Harding Loevner is not responsible for the content, accuracy, or timeliness and does not make any warranties, expressed or implied, with regard to the information obtained from other websites. These links are provided for your convenience and for navigational purposes only. They should not be considered a recommendation to buy or sell any securities. It should not be assumed that investment in the securities identified has been or will be profitable.
By clicking on the "I Agree" button, you acknowledge that you have read and understood this disclaimer and wish to proceed.
Ramadan’s Shifting Dates Have Complex Effects on Businesses
March 07, 2024
The holy month of Ramadan affects companies and products differently each year, and it is essential for investors in Muslim-majority countries to understand these effects. The holiday, during which Muslims fast from dawn to dusk, starts 10-12 days earlier each year, unlike fixed holidays such as Christmas. This year, Ramadan starts at sunset on March 10 and lasts until April 9.
Ramadan’s Slowly Shifting Seasonality
Timing of Ramadan relative to Northern Hemisphere seasons, 2010-2040
The fact that the holy month moves each year means that the effects of Ramadan on businesses change over time. Recently, when Ramadan was during the summer, it was a significant headwind for companies such as brewers, as the fast suppressed demand for beer during what would otherwise be a peak month. But now as Ramadan is moving earlier in the year, that headwind will lessen.
By Safia Williams, CFA, Associate Analyst | February 28, 2024
At Harding Loevner, we are quality growth investors, which means we seek to invest in well-managed, financially sound businesses that can sustain profitable growth across economic cycles. But what do we mean when we talk about quality and growth as attributes of a company? While there is no standard definition of quality or growth in the investing world, our quality rankings consider factors such as the stability, level, and trend of a company’s profitability as well as its balance-sheet strength, and our growth rankings consider historical and estimated future changes in sales, earnings, and cash flows.
How companies perform on those measures can change over time. Industry dynamics evolve, which can lead to a shift in competitive positioning. Macroeconomic cycles and deviations in management strategy can also alter the long-term outlook. Even companies that consistently rank highly for quality and growth must be continuously assessed for signs of deterioration in their financial health, competitive advantages, and other factors. The challenge isn’t just determining the businesses that meet our criteria today, but also which businesses will sustain their quality and growth characteristics over the long run.
The charts below illustrate how variable those characteristics are. The bubbles represent the roughly 2,700 stocks that were in the MSCI All Country World Index (ACWI) at the end of 2018. In the tab for 2018, they’re split down the middle such that the top half of stocks (the orange portion) were considered high quality, based on their Harding Loevner quality scores at the time. But over the next five years, the characteristics of the companies changed. Now click the tab for 2023. It shows that only 25% of index members were also above the threshold that was set in 2018.
In fact, in any five-year period only about a quarter of companies were in the top half of quality at the start and the end of the period:
HOLT, FactSet, MSCI, data as of December 31, 2023
Identifying a persistently high-quality and fast-growing company is even more difficult, as the following charts show. Clicking the tab for 2023 reveals that only 10% of companies in the index remained above the threshold for quality and growth that was set in 2018. This means investors can expect that the majority of high-quality, growing businesses today will not score as high-quality, fast growers in five years.
TSMC and France-based Dassault Systèmes are among companies that, because of their strong competitive advantages, have managed to sustain their quality and growth rankings in our measurements. TSMC is one of the few reliable, high-volume global manufacturers of advanced and specialty semiconductor chips, a strength that stems from decades of proprietary technology development and disciplined execution. Dassault is a provider of software for virtual product design that has one of the broadest offerings in the space, able to be used by customers in multiple industries. Its high proportion of recurring revenue from software subscriptions and a loyal customer base have insulated the business from economic downturns. In fact, both TSMC and Dassault have remained in the top quadrant of quality and growth every year for the past 15 years (and have been owned in Harding Loevner’s International Equity model portfolio for that entire time). But as the data show, such companies are the outliers.
Quality growth investing also isn’t as simple as buying and holding companies that score in the top quadrant of our rankings—or immediately discarding the stock of a company that has strayed from that territory. These scores are merely proxies that attempt to capture each company’s financial strength, competitive advantage, and the projected trajectory of their growth. Indeed, fundamental analysis can sometimes lead us to identify companies that meet our investment criteria even if they don’t, at the moment, score in the top quadrant. Therefore, it’s better to analyze and monitor a business’s quality and growth through the fundamental research that informs these scores rather than speculate on potential movements in the scores themselves.
At Harding Loevner, this process begins with an analyst examining a company’s competitive position within its industry using the framework of Porter’s Five Forces, which is based on Harvard University professor Michael Porter’s book, Competitive Strategy: Techniques for Analyzing Industries and Competitors. Once a company is affirmed to meet our investment criteria, analysts continue to track and debate the strength of its fundamentals and growth potential, communicating with colleagues when these factors are at risk of deterioration. It’s because we know quality and growth may not always persist that our research process to evaluate these characteristics must.
By Yoko Sakai, CFA, Director of Research | February 21, 2024
Japan has been undergoing a baby bust for decades. In the early 1970s, there were years where more than 2 million babies were born in Japan, but since then, those numbers have declined steadily. By the 1990s, there were about 1.2 million babies born each year in Japan, while in 2022, births fell below 800,000 for the first time.
Source: The Statistics Bureau of Japan
One might expect that a decrease in the number of babies would be a major problem for a company like Unicharm, which dominates the Japanese market for disposable diapers. But by taking advantage of other demographic trends that have opened new markets for the company, Unicharm has seen its overall business grow, even as its core market shrinks.
Unicharm was founded in 1961 as an insulation and building materials supplier and later began manufacturing feminine sanitary pads. In the following decades, Unicharm relied on its expertise in processing non-woven fabrics and absorbent materials made from petroleum-based polymers to expand into other markets beyond feminine care, especially diapers.
Unicharm grew to dominate the market for baby diapers in Japan, with an estimated 41% retail market share in 2023. But the product segment has become a challenging, low-margin business, partly because consumers have not been swayed to pay a premium for baby diapers with special features, and the decreasing number of babies being born has meant that Unicharm is fighting for its portion of a shrinking pie. Meanwhile in neighboring China, once a key market for the company’s baby diapers, stiff competition from local manufacturers has driven down retail prices.
While Unicharm says it will continue to make baby diapers, because of the positive and happy associations consumers attach to baby products, the company has increasingly focused on market segments that offer higher margins (if not the same positive feelings) such as adult incontinence products.
Japan now has the highest proportion of elderly citizens of any country in the world. About 29% of Japanese are over age 65, while more than 10% are 80 or older. As the population has gotten older, Unicharm’s adult products have become a larger part of its business. Adult diapers constitute about 33% of the company’s net sales in Japan today, up from an estimated 25% in 2018. Overall, the company derived one-third of its sales and 40% of its profits from Japan last year.
Adult incontinence products are a high-margin business because consumers are willing to pay a premium for products with special features, such as improved fit to prevent leakage. Furthermore, the company’s marketing campaigns have been successful at creating demand for its light and mini-incontinence pads by associating them with an active lifestyle.
The sort of quality companies that we look to invest in have, among other characteristics, strong management teams who can respond to changing market and industry dynamics. Unicharm’s ability to leverage its core competency in absorbent materials in different markets is an example of how managing change can help a business thrive over time. And Unicharm might even find a way to help address Japan’s aging demographics—it’s recently introduced a new feminine hygiene product that monitors ovulation to help women plan their pregnancies.
By Yoko Sakai, CFA, Director of Research | December 13, 2023
As bottom-up investors, we aim to invest in high-quality growth businesses at reasonable prices to provide superior risk-adjusted returns over the long term. To determine what constitutes a high-quality growth business, we research a company’s management, financial strength, growth prospects, and we closely examine the industry in which it operates to determine the company’s competitive advantage.
It’s as important to examine a company’s industry as it is to examine the fundamentals of a company. An analysis of industry structure can inform how well-positioned a company is relative to competitors, as well as the profit potential for the company.
In this six-part video series, we examine each Porter Force and discuss how we use them to analyze industries. Watch the series introduction below and click through to see how we leverage Michael Porter’s Five Forces framework for industry analysis.
“Out of Our Minds” presents the individual viewpoints of members of Harding Loevner on a range of investment topics. For more detailed information regarding particular investment strategies, please visit our website, www.hardingloevner.com. Any views expressed by employees of Harding Loevner are solely their own.
Any discussion of specific securities is not a recommendation to purchase or sell a particular security. Non-performance based criteria have been used to select the securities discussed. It should not be assumed that investment in the securities discussed has been or will be profitable. To request a complete list of holdings for the past year, please contact Harding Loevner.
There is no guarantee that any investment strategy will meet its objective. Past performance does not guarantee future results.
