Many investors are now looking overseas for investment
opportunities. U.S. valuations have become rich, leaving many value
junkies holding excess cash. Luckily, GuruFocus covers not only
international markets, but also Gurus that specialize in non-U.S.
Two managers stand out in this space:
) oversees more than $78 billion at Oakmark Funds with the lion's
share of that being allocated to his prestigious Oakmark
International Fund. Fellow international money manager
Francisco Garcia Parames
(Trades, Portfolio) runs the flagship Bestinfond fund for Bestinver
Asset Management. Parames has outperformed the S&P 500 by more
than 1,100% over his 20-year career. His 15.3% annualized rate or
return since 1993 puts him in a league of his own.
A quick look at their portfolio sector weightings shows a shared
favoritism toward consumer cyclicals.
These stocks are known for their high-flying exuberance in bull
markets and quick falls during economic downturns. Each fund has
over 20% allocated to this sector and they appear to still be
buying. Clearly these men have faith in the continued economic
growth of Europe and Asia where the majority of their holdings
To compare this view with Paremes and Herro's US peers, I combined
the portfolios of all 148 Gurus tracked by GuruFocus.com. The list
was filtered down to American stocks only and then ordered by the
stocks' combined portfolio weighting. The result is a list of the
top ten stocks held by the best money managers in the US (see image
Of the resulting list, not one of the stocks fell into the consumer
cyclical category. U.S. Gurus are instead choosing to favor
financials, technology and consumer staples. This contrast begins
to illustrate the underlying belief of more favorable investment
Each of the previously mentioned international funds also made
substantial equity purchases in the most recently reported quarter.
David Herro (Trades, Portfolio) New Buys
David Herro (Trades, Portfolio)'s largest additions were Lloyds
Banking Group (LLOY.UK) and Pernod Ricard NV (RI.France). Lloyd's
has advanced by more than 100% since Herro went long, but Pernod
Ricard remains within his fill range. The company produces wine and
spirits. Its top brands include Absout, Pernod, Chivas, Jameson and
Francisco Garcia Parames (Trades, Portfolio) New
Parames' big three were Colruyt (COLR.Belgium), Ashmore Group
(ASHM.UK) and Koninklijke Ahold (AHO.Netherlands). Each remain
within 10% of his original purchase range and are likely worth a
closer look. Colruyt is a conglomerate consumer goods firm that
operates dozens of subsidiaries in the retail, wholesale and food
service industries. Ashmore Group is a growing investment
management firm trading at just 12 times trailing twelve month
Given the gains from Herro and Paremes' previous stock picks, these
names could be the next big movers for these international Gurus.
If you have never invested in companies outside the US borders,
this may be a good time to begin. Respected money managers continue
to seek value overseas while cutting exposure to domestic equities.
James Hunt of the Tocqueville International Fund recently
"The U.S. market in general is fairly valued. I think Europe is
cheap. Japan is totally a stock-picking market, and emerging
markets bear analysis."
His view is shared by veterans Philip Best and Marc St. John Webb,
whose Argonaut fund returned 39.2% to investors last year. Their
case for European small caps was recently outlined as follows:
- The Russell 2000 Small Cap index in the US is about 30%
higher than its pre-crisis high in 2007, whereas the MSCE
European Small Caps index is still 6% below its 2007 high.
- In 2007 the MSCI European Small Cap trailing price-to-book
peaked at 2.8 times but currently stands at only 1.7 times.
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