(PUB) Investing 2015

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The Foreign-Value Rainbow Tracking Morningstar Analyst Ratings | Russel Kinnel

The fund now has stellar returns over the trailing three-, five-, 10 -, and 15 -year periods, but it is still prone to stretches when it falls out of favor. ´ -rated Vanguard International Value VTRIX has three flavors of value on offer. Lazard Asset Management, which runs 40% of assets, is a relative value manager, and Edinburgh Partners, which runs 35% , uses a more traditional value approach. Deep-value shop ARGA Investment Management runs 25% of the fund. That approach means the fund tends to avoid the top or bottom decile on a yearly basis, but over the long haul returns are solid. The mix of three advisors means the portfolio isn’t drastically different from the norm, but the fund has bigger weightings in Japan and emerging markets than its peers. With fees of just 0 . 44% , management has a fairly low bar to beat its benchmark. Dodge & Cox International Stock DODFX shows the value of sticking with value investing through thick and thin. After a great run, financials killed the fund in 2008 , but the managers stuck to their guns and have produced strong results since then. The fund closed to new investors in January—another sign of Dodge’s shareholder-friendly outlook. Oakmark International OAKIX , also closed to new investors, has outstanding trailing returns as David Herro and Rob Taylor have been adept value investors. They look for companies trading at steep discounts to their intrinsic values. While growth managers chase the next big thing, these managers just want to buy a good company on the cheap. There’s a reason, after all, that value has produced such strong returns. BNP Paribas BNP and Daimler DAI are not nearly as exciting as Alibaba BABA and Tesla TSLA , but their returns are. ´ -rated MainStay ICAP International ICEUX has stayed true to its strategy of buying value with a catalyst over the years. That will bear watching as comanager Tom Wenzel stepped down in 2014 for health reasons, but lead manager Jerry Senser remains in place. He’s had some nice winners among financials. K

You may have noticed that there are relatively few funds in the Morningstar 500 categorized as foreign large value. That’s because the Morningstar Style Box skews a bit toward growth, resulting in some of the value-oriented foreign large-cap funds being classified as foreign large-blend. Here I give you a more complete picture of foreign large-cap Morningstar Medalists that pursue value strategies. They run the spectrum from deep value to relative value. I’ll take them in order from the furthest to the left of the style box over to the right. Or, to put it another way, from deepest value to those that are closer to the middle. Causeway International Value CIVVX , which has a Morningstar Analyst Rating of Œ , is the deepest- value fund of the six because it buys battered shares in hard-hit industries. Over time that’s worked quite nicely, although lately it hasn’t performed so well. Owning energy and materials has been a recipe for trouble, but managers Harry Hartford and Sarah Ketterer have had far more wins than losses. These things tend to rotate in and out of favor, so this fund may be a good rebound bet. The fund is also note- worthy for its rule against owning emerging-markets stocks, so investors are getting developed-markets exposure only. Tweedy, Browne Global Value TBGVX has energy and materials stocks, too, but only in line with the foreign large-value average. As I mentioned last month, the fund hedges its currency exposure, and that’s been a boon recently because of the strength- ening dollar. But the reason for buying here is Tweedy’s steadfast value approach. Tweedy uses a Buffett-like strategy that emphasizes patiently buying solid franchises at a discount. It has only recently returned to energy for the first time in more than a decade as it considers Total TOT and Shell ’s RDS .A discounts too attractive to pass up.

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Our ratings are chosen for long- term success. Analysts assess a fund’s competitive advantages by analyzing people, process, parent, performance, and price. They do rigorous analysis and then submit their ratings to a committee that vets their work for thoroughness and consistency.