Navigating Global Volatility: How Harding Loevner's Global Equity ADR Strategy is Capitalizing on Undervalued Opportunities

The first quarter of 2025 has been a litmus test for global investors, with U.S. policy uncertainty rattling markets and reshaping capital flows. Amid this turbulence, Harding Loevner's Global Equity ADR strategy has positioned itself as a beacon for investors seeking undervalued equities in a world of geopolitical and economic upheaval. By focusing on non-U.S. markets and companies insulated from policy whiplash, the fund is capitalizing on a historic shift in market dynamics.

The Policy Volatility Tsunami

The U.S. political landscape has become a minefield of unpredictability, with trade tariffs, regulatory flip-flops, and institutional erosion creating ripples across global supply chains. Harding Loevner's Q1 commentary highlights parallels between current U.S. policymaking and the erratic practices of emerging markets—think abrupt contract cancellations or protectionist trade shocks. This has led to a stark divergence in investor sentiment: non-U.S. equities surged ahead, outperforming U.S. stocks by the largest margin in 15 years.

The firm attributes this shift to three factors:
1. Valuation discounts: Non-U.S. markets now host 73% of high-quality, fast-growing companies (market cap >$5B), yet these stocks trade at discounts relative to U.S. peers.
2. Global trade resilience: Despite U.S. tariffs, global trade volumes grew 4% in Q1, driven by cross-border partnerships outside America's borders.
3. Policy credibility decay: The U.S. dollar's reserve status faces challenges as markets question its stability amid fiscal recklessness.

Where to Find Undervalued Gems

Harding Loevner's strategy hinges on identifying companies with enduring profitability and minimal policy exposure. Here's where the fund is finding value:

1. Tech's New Titans (Outside the U.S.)

The AI and semiconductor boom is a global game, and non-U.S. firms dominate critical supply chains:
- ASML (ASML): The Dutch giant's EUV lithography machines are irreplaceable for advanced chipmaking.
- TSMC (TSM): Despite U.S. pressure, TSMC's near-monopoly in 3nm chips positions it as a linchpin of the AI revolution.
- Schneider Electric (SBFG.PA): French energy management leader powering AI data centers with smarter infrastructure.

2. Healthcare's Innovation Hotspots

Europe and Asia are leading breakthroughs in healthcare:
- Novo Nordisk (NVO): Danish pharma giant dominates obesity treatments, with its Wegovy drug driving 30%+ revenue growth.
- Roche (ROG.SW) & Zealand Pharma (ZEYL): A Swiss-Danish partnership revolutionizing diabetes and obesity therapies with safer, more effective drugs.

3. Industrials Betting on Global Trade

Firms insulated from protectionism thrive:
- Canadian National Railway (CNI): Despite U.S. tariff shocks, its cross-border logistics network remains vital for North American supply chains.
- Air Liquide (AI.PA): French industrial gases giant pivoting to green hydrogen projects in Europe and Asia after shelving U.S. pipeline plans.

The Fund's Playbook: Resilience Over Momentum

Harding Loevner's process rejects chasing short-term trends. Instead, it focuses on:
- Structural growth: Sectors like AI infrastructure, renewable energy, and precision healthcare.
- Governance quality: Companies with stable management and low debt, avoiding those reliant on “whims of faceless bureaucrats.”
- Valuation discipline: Buying non-U.S. stocks at discounts to their U.S. peers despite similar (or better) growth profiles.

Risks and Opportunities Ahead

While the strategy is compelling, risks remain:
- Policy overreach: Further U.S. tariffs or sanctions could disrupt global supply chains.
- Currency swings: A weaker dollar could boost non-U.S. equity returns but add volatility.
- Economic slowdowns: Recession risks in key markets (e.g., Europe) could test earnings resilience.

Investment Takeaways

For investors seeking to navigate volatility:
1. Allocate to non-U.S. equities: Harding Loevner's Global Equity ADR (HLGAX) offers a disciplined entry point into markets trading at discounts.
2. Focus on global leaders: Prioritize firms like ASML, Novo Nordisk, and Schneider Electric with irreplaceable roles in tech and healthcare.
3. Avoid U.S. policy hostages: Steer clear of companies overly reliant on U.S. regulatory approval or trade deals.

Final Word

In a world where U.S. policy volatility is the new normal, Harding Loevner's Q1 playbook shows that undervalued opportunities are often where the headlines aren't. By anchoring in non-U.S. markets and companies with durable moats, investors can turn geopolitical noise into portfolio gain.

The message is clear: When uncertainty reigns, look beyond the U.S.—and let resilience be your compass.