Fund Watch

Global Funds to Fight the Gloom

Three go-anywhere managers find opportunities amid the turmoil of the world’s markets.

By Thomas M. Anderson, Associate Editor, Kiplinger's Personal Finance

June 24, 2010

Could someone please pass me an antidepressant? Heaps of bad economic news and the bleak pronouncements of many speakers at Morningstar’s annual investment conference in Chicago make me want to hide under the bed. However, comments by three globe-trotting fund managers give me reason to be a little more upbeat.

Investors are depressed after a decade of poor stock returns. But you can now invest in companies with strong growth prospects at bargain prices, says Dan O’Keefe, co-manager of Artisan Global Value (symbol ARTGX). For example, American Express (AXP) trades for 13 times what analysts expect the company to earn this year. That’s well below its average price-earnings ratio of 18 over the past five years. The company, O’Keefe says, will benefit as the world continues to move from paper money to credit cards. He also likes MasterCard (MA) for the same reason.

O’Keefe and his co-manager, David Samra, keep it simple. They look for companies that they consider undervalued and that have good business models, trustworthy management teams and little debt. The strategy has been working. Global Value, which started in December 2007, has performed well in its brief history. O’Keefe and Samra also run Artisan International Value (ARTKX), which has compiled a stellar record investing in foreign stocks since its 2002 inception.

Rob Gensler, manager of T. Rowe Price Global Stock (PRGSX), calls himself a growth manager who cares about price. “Why? Because if we are wrong, look out below,” Gensler says.

Global Stock’s portfolio reflects his enthusiasm for Europe. It holds about one-fourth of its assets in European issues. Pernod Ricard (PDRDY.PK), a French spirits producer, and Rolls-Royce Group (RYCEY.PK), the British luxury-car maker, are top holdings. Gensler likes them for, among other reasons, their growth opportunities beyond Europe. He’s also partial to stocks of “boring and stable” European companies, such as Spanish telecommunications giant Telefónica (TEF). “All you need to happen is for Europe to muddle through for these companies to do okay,” he says.

Over the past five years through June 23, Price Global Stock returned 2.4% annualized, while the average global-stock fund was flat.

A weak euro is “a big cherry on top of the cake” for European exporters, says Philippe Brugere-Trelat, of Mutual Global Discovery (TEDIX). Brugere-Trelat, a veteran value investor who became the fund’s co-manager last December, is searching for beaten-down stocks of European companies that generate much of their revenues outside the continent. Top holdings include large exporters, such as food giant Nestlé (NSRGY.PK), and elevator manufacturer Schindler Holding, both based in Switzerland. “When everything looks very dark, it is a good time to pick stocks that will be winners … as long as you are patient,” says Brugere-Trelat.

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