Page 9

Field of Play


One benefit of being a global investor is in learning how a particular business should be valued – which is often properly done in the U.S. – and applying that in countries where the valuation is different. Charles de Vaulx, 11.26.08

In general, we believe it’s prudent for long-term investors to have a significant and growing portion of their portfolios allocated to equities in foreign countries that are growing faster than the U.S. and whose currencies will likely appreciate against ours. We’ve primarily been investing in closed-end funds offering a double discount – trading at a discount to their net asset values and in what we believe are growth economies undervalued by the capital markets. David Nierenberg, 7.28.06

I’d argue that literally every investor today has to be a global investor to understand what’s going on – certainly in markets like energy and commodities, but also to take advantage of where we think the best opportunities are going to be. John Burbank, 8.31.08

Another reason it’s important to be more international in your outlook: if you’re not paying attention to what competitors in emerging markets can do, you’re likely taking on risk with U.S.-company investments that you shouldn’t. Robert Williamson, 8.31.08

One interesting aspect of what’s going on is the global nature of the credit explosion and now decline. Credit-fueled liquidity pushed asset valuations up dramatically across assets and in just about every part of the world. When I first started in the business, trends didn’t spread as quickly or from market to market around the world like they do today. I’d imagine there’s no going back on that front. Bob Wyckoff, 12.21.07

For the types of companies I generally invest in – sophisticated global companies like Diageo, Nestlé, Pernod Ricard – the information is generally accessible and complete, so I don’t require a greater margin of safety or lower multiples because they’re international. Also, partly because the field hasn’t been as crowded, I’ve had as good, if not better, access to senior management at non-U.S. companies. Thomas Russo, 6.30.06

Believe it or not, there are still countries around the world where accounting standards are conservative. In the AngloSaxon world we're used to seeing overstated earnings, but in places like South Korea, Japan, Germany and Switzerland, you can sometimes find earnings that are significantly understated. Charles de Lardemelle, 11.26.08

Japan is particularly interesting right now. While corporate governance is improving in the developed countries, Japan is probably still the furthest behind. Some of the best opportunities today, though, are in companies that have a long way to go in improving corporate governance. Alexander Roepers, 2.28.07

We’re not afraid of political risks, which we generally think are exaggerated. We invested in Thailand after the coup. We’re investing in Turkey in the face of political uncertainty. It’s not a big component of what we do, but there are always small pockets of mispriced risk and political uncertainty can create very nice bargains. Oliver Kratz, 6.29.07

We like to operate under the illusion that if we see something that is out-and-out unacceptable being done, that there’s a clear rule book and well-defined avenue to complain about it. It’s not clear that’s yet the case in China. Will Browne, 9.29.06

We take into consideration what we call attitudes toward capitalism. For example, there's a very low risk of being squeezed out at an unfair price if you own 13% of a company in the U.K., but that could happen in Switzerland, where the laws are less shareholder-friendly. Álvaro Guzman de Lázaro, 11.26.08

In general, there aren’t many countries in which we wouldn’t invest. But if a country is too economically or politically troubled or the rule of law doesn’t really prevail, we pass. The main country in which we won’t invest today is Russia. There’s still too much risk for foreign (or even local) investors that you’ll think you own an asset and then Mr. Putin decides you don’t. Jean-Marie Eveillard, 5.30.08

We haven't been traditional emerging markets investors because we do not chase growth or glamour, but we like nothing better than to invest in emerging markets on a contrarian basis. Strong economic growth is never steady, so you can find nice opportunities to invest after booms have gone temporarily bust. Charles de Vaulx, 11.26.08

We’ve recently been very active in the Middle East, which we consider to be the new emerging-markets story today and the third one-billion-plus population area of the world that any global investor absolutely has to understand. John Burbank, 8.31.08

We think Europe is particularly attractive right now – it’s probably ten years behind the U.S. in terms of rationalizing corporate structures and activism is becoming more accepted and will continue to promote change there. Barry Rosenstein, 3.30.07

We've found over the years that European markets are much less efficient than those Winter 2008

Value Investor Insight 9

Words of Investing Wisdom  

Greatest Hits” collection of investing insight from Value Investor Insight

Words of Investing Wisdom  

Greatest Hits” collection of investing insight from Value Investor Insight