Controlling Risk With International Stocks
Thornburg International Value seems to be making a habit of protecting its shareholders when things go sour. From July 23 through August 6, the MSCI EAFE index, which tracks the stocks of developed foreign markets, fell 6%. Thornburg lost 3% during the downturn. During the 2000-02 bear market, the average diversified international fund plunged 49%, while International Value dropped 30%. "We control risk in volatile markets with diversification, finding stocks that are out of favor, and buying what's promising at a discount," says Wendy Trevisani, who runs the $14 billion fund along with Bill Fries and Lei Wang.
Managed with other Thornburg funds out of Santa Fe, N.M., International Value (symbol TGVAX; 4.5% sales charge) invests across the style spectrum. Like its cousin, Thornburg Value (TVAFX), International Value buys stocks that fall into one of three categories: basic value plays, which are typically economically sensitive companies; stable blue chips with steadily rising earnings; and younger, emerging firms. The Thornburg managers hate to overpay and instead aim to buy stocks that trade at steep discounts to the intrinsic value, or true worth, of the underlying companies.
Just over half of International Value's assets are in Western Europe, and a hefty 25% reside in emerging markets, including China, Mexico, and South Korea. Within emerging markets, the fund tends to invest in well-known franchises, such as China Mobile (CHL) and America Movil (AMX), Latin America's largest cell-phone company. "These companies have growth profiles that are hard to come by elsewhere in the world," says Trevisani. In Europe, she favors such telecommunications firms as Britain's Vodafone (VOD) and Spain's Telefonica (TEF), as well as drug makers like Swiss pharmaceutical giant Roche and Novo Nordisk (NVO) of Denmark.
International Value has a terrific long-term record. From its launch in May 1998 through August 7, the fund gained 14% annualized, beating the EAFE index by an average of nine percentage points per year. So far this year, through August 7, the fund is up 17%, placing it in the top 1% of funds that invest in large, undervalued foreign companies. Annual expenses are a below-average 1.33%.