Bullish on Eastern Europe
How does the world look to Rudolph-Riad Younes? One of the most original and astute international-fund managers in the business, Younes has steered Julius Baer International Equity to an impressive 15% annualized return in the ten years to February 29, 2008, more than eight points ahead of the MSCI EAFE Index.
That fund is closed, but you can invest with Younes and co-manager Richard Pell in a similar fund, Julius Baer International Equity II (symbol JETAX), a member of the Kiplinger 25. Baer International Equity II has returned 11% over the past year, eight points better than the same international index.
Lebanese-born Younes tends to think and talk in large, long-term themes and invest accordingly. Here are a few:
He's a bull on Russian stocks, both exporters and domestic consumer plays. The huge run-up in prices of oil, gas, gold, nickel and other natural resources is showering wealth on the country. Now the money is trickling down and coursing through the Russian economy. "Almost any commodity known to man is found in a huge quantity in Russia," says New York-based Younes.
He notes that Russian consumer demand has essentially been pent-up for 100 years and that shoppers are making up for lost time. "When these guys spend, they spend."
Younes is equally bullish on other Eastern European countries, such as Poland and Hungary -- four of his 20 largest positions are in Eastern European banks -- but for somewhat different reasons. These countries' trade and economic ties to the European Union are growing stronger, and eventually they'll be admitted to the EU.
Therefore, unlike in Latin America and much of Asia, he sees an environment of industrialized world-like political stability paired with high developing world-like economic growth rates. "It's almost like having your cake and eating it, too," he says.
He has 25% of the fund's portfolio in emerging markets, but most of this is in Eastern Europe instead of China, India and Latin America. One way he does tap the booming economies of Asia, Latin America and the Middle East is through infrastructure stocks in Europe and elsewhere. For instance, Lafarge, a big French cement company with a global footprint, is one of his top ten holdings.
In fact Younes is quite bullish on Europe's future and quite bearish on the U.S. "The [geographically expanding] EU will become the number-one economic power in the world in ten to 20 years, given what is happening in the U.S.," he predicts. "If U.S. economic policies remain as they are, it will accelerate the downward spiral of the U.S. standing in the world."