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How to Play Grantham's Recs in Barrons this weekend....
With luck we'll be talking to David Marcus of Evermore Global Value (EVGBX) this month. It has a one-star rating and an eclectic value focus, with 63% of the portfolio invested in Europe. (I'll pause to let the peanut gallery making dismissive noises, none of which will deepen my respect.) Mr. Marcus has a very interesting pedigree - he was one of the Mutual Series managers under Michael Price and was, by some reports, the brightest of them all. He was there for 12 years, then left to manage the family fortune of a Swedish industrialist. (And also ran and closed several hedge funds.) With time he came to miss the life of a fund manager and so launched two value-oriented funds (Global and European).
When he and I last spoke - a Morningstar a year or two ago - he was incredibly frustrated. He was pleased with his portfolios, which contained incredibly undervalued stocks that kept - against all reason - getting more undervalued. Investors had lost heart and he was forced to close European Value but maintained the faith in Global Value. Enjoyed a rebound last year, up 38%.
This is one of those funds that's hard to benchmark. Morningstar has it as "world stock" but the money is all in the US and Europe. There's no European value index readily available. He trails Mutual European (TEMIX). The problem is that I'm not (yet?) sure why. He had a good run at Mutual, seems smart, makes a compelling case for his disconnect between the value of his holdings and their price, and yet hasn't consistently delivered (yet).
From the interview: "High-quality stocks in the U.S. are not nearly as bad as the rest of the market. "
I'd agree with this - I look at a lot of large cap names that, while not cheap either in many cases, are trading at more reasonable valuations than the smaller and/or 'sexier' names. People seem desperate for what they perceive as growthy that boring/consistent have not gotten as much attention.
This, to me, is enormously concerning and I agree big time with Grantham:
"I worry about food, and I worry about Africa. The global economy has really two civilizations, or two systems. One is everything outside of Africa, where Taiwan, Thailand, Canada, Mexico, and other countries are all one big system moving together—trading oil and everything else. And then there is Africa, which, with the possible exception of South Africa, is its own little world. But it's the only part of the world where the population, on a broad basis, still is growing rapidly. It probably will decline, but these countries can't produce enough food, unless they get good advice and capital and fertilizer—or they become really clever farmers, and get a lot of help and sensible governments.
The countries I worry about most immediately are in North Africa, curling all the way into Syria, because they eat wheat. The price of wheat is two, three times what it used to be, and the price of energy is four times what it used to be. These are not rich people, so they have been desperately squeezed, and the weather is bearing down on agricultural production. The most dependable aspect of climate change is more droughts and more floods.
All of this has many implications, from countries like Egypt being able to feed its population to immigration policy in Europe to the impact on high-grade, low-cost phosphate, a big chunk of which comes from Morocco. Phosphorus is crucial for farming. The much higher prices of wheat, oil and, to some extent, fertilizers have helped destabilize various societies in this region. I worry about what happens if the deterioration spreads to Morocco."
Agriculture stocks did not do well last year and I think anyone who agrees to some degree with the above may view that as a long-term opportunity. Some related farming stocks (irrigation, industrial farming etc) have not done well, either.
Personally, I sleep well at night owning agricultural names - people have to eat and I remain concerned long-term not that there won't be food but it becomes, "food at what price?" I think that question will result in definite instability in many parts of the world. Water is another concern - water funds have done reasonably well lately, but I think they're worth considering with a long-term view.
I took a look at EVGBX in comparison with JGVAX and PGVFX and I fear I can't find even one reason to prefer it over either of those. It's no smaller in AUM, little if any more 'valuey', hasn't performed nearly as well, has been far more volatile and is quite a bit more expensive. Heck, it even has a higher turnover. I didn't check into what kind of organization Marcus has working with him, but I can't imagine it being much better than the Perkins or Polaris shops.
With luck we'll be talking to David Marcus of Evermore Global Value (EVGBX) this month. It has a one-star rating and an eclectic value focus, with 63% of the portfolio invested in Europe. (I'll pause to let the peanut gallery making dismissive noises, none of which will deepen my respect.) Mr. Marcus has a very interesting pedigree - he was one of the Mutual Series managers under Michael Price and was, by some reports, the brightest of them all. He was there for 12 years, then left to manage the family fortune of a Swedish industrialist. (And also ran and closed several hedge funds.) With time he came to miss the life of a fund manager and so launched two value-oriented funds (Global and European).
David
I bailed on EVGBX when for some reason it stopped being NTF at Scottrade. I used to hold it in my IRA. Not sure about its NTF status now, but I'm sure glad I bailed.
Grantham thinks that EM is close to fair value as well as "European Value" stocks.......
GPEOX and that Dreihaus fund I'm playing EM;
How can I play "European Value"? Any MFO faves focus on that? ETFs?
Thanks!
Okay so trying to understand. If something is close to "fair value", why do we want to buy? Don't we want to buy "undervalued"? We want to sell "overvalued".
The GMO shop certainly isn't enthusiastic about emerging markets either, a fact I gather from their return estimates, which i have seen. The R2000 they think is grossly overvalued, the SP500 to achieve historically poor returns over a 7 year horizon, and US high quality stocks positive but low returns. They are underweight bonds where they can be and are emphasizing absolute return vehicles, cash and tactical allocations. They run hundreds of billions in their strategies. They have a tendency to be early but right. I have been following them and their research for a LONG time.
Investors who want to jump into European stocks would do well to look at FPIVX as a way to get exposure. New, but very promising start. Nearly 70% exposure there.
Comments
When he and I last spoke - a Morningstar a year or two ago - he was incredibly frustrated. He was pleased with his portfolios, which contained incredibly undervalued stocks that kept - against all reason - getting more undervalued. Investors had lost heart and he was forced to close European Value but maintained the faith in Global Value. Enjoyed a rebound last year, up 38%.
This is one of those funds that's hard to benchmark. Morningstar has it as "world stock" but the money is all in the US and Europe. There's no European value index readily available. He trails Mutual European (TEMIX). The problem is that I'm not (yet?) sure why. He had a good run at Mutual, seems smart, makes a compelling case for his disconnect between the value of his holdings and their price, and yet hasn't consistently delivered (yet).
It's the "yet" that haunts me.
David
I'd agree with this - I look at a lot of large cap names that, while not cheap either in many cases, are trading at more reasonable valuations than the smaller and/or 'sexier' names. People seem desperate for what they perceive as growthy that boring/consistent have not gotten as much attention.
This, to me, is enormously concerning and I agree big time with Grantham:
"I worry about food, and I worry about Africa. The global economy has really two civilizations, or two systems. One is everything outside of Africa, where Taiwan, Thailand, Canada, Mexico, and other countries are all one big system moving together—trading oil and everything else. And then there is Africa, which, with the possible exception of South Africa, is its own little world. But it's the only part of the world where the population, on a broad basis, still is growing rapidly. It probably will decline, but these countries can't produce enough food, unless they get good advice and capital and fertilizer—or they become really clever farmers, and get a lot of help and sensible governments.
The countries I worry about most immediately are in North Africa, curling all the way into Syria, because they eat wheat. The price of wheat is two, three times what it used to be, and the price of energy is four times what it used to be. These are not rich people, so they have been desperately squeezed, and the weather is bearing down on agricultural production. The most dependable aspect of climate change is more droughts and more floods.
All of this has many implications, from countries like Egypt being able to feed its population to immigration policy in Europe to the impact on high-grade, low-cost phosphate, a big chunk of which comes from Morocco. Phosphorus is crucial for farming. The much higher prices of wheat, oil and, to some extent, fertilizers have helped destabilize various societies in this region. I worry about what happens if the deterioration spreads to Morocco."
Agriculture stocks did not do well last year and I think anyone who agrees to some degree with the above may view that as a long-term opportunity. Some related farming stocks (irrigation, industrial farming etc) have not done well, either.
Personally, I sleep well at night owning agricultural names - people have to eat and I remain concerned long-term not that there won't be food but it becomes, "food at what price?" I think that question will result in definite instability in many parts of the world. Water is another concern - water funds have done reasonably well lately, but I think they're worth considering with a long-term view.
I owned PGVFX at one time, and liked several things about the fund ... one being atypical weightings, such as ~ 10% in Scandinavia, as I remember.
What am I missing?