By Walter Frank
MONEYLETTER.com
Here are two funds with a foreign flair that previously were unavailable to no-load investors. Now, however, both Henderson International Opportunities and Nuveen Tradewinds Global All-Cap Plus can be purchased without a transaction fee from Schwab, and are being added to Moneyletter's foreign funds coverage.
Henderson International Opportunities (HFOAX): A multi-manager approach is the hallmark of this fund. Assets are divided into five sub-portfolios, each of which is "focused on specific areas of sector or geographical expertise." While each of these sub-portfolios is driven by bottom-up fundamental analysis, decisions as to how to weight assets among the five are determined using a combination of bottom-up and top-down analysis. In a nutshell, the five sub-portfolios are as follows:
Europe 1: Growth at a reasonable price approach with emphasis on price (i.e, value), all market capitalizations. Looks for 25%-plus upside potential within 12 months.
Europe 2: Growth at a reasonable price approach with emphasis on growth, mid-cap focus.
Japan: Fundamental approach with a bias to value, contrarian (out-of-favor stocks) philosophy, all market caps.
Asia Pacific: Fundamental approach with a bias to value, all market caps.
Global Technology: Focus on valuation, all market caps, may focus on themes.
Overall, Europe generally accounts for 25 stocks in the portfolio, Japan and technology ten apiece, and Asia Pacific 15 for a total of about 60. No one holding exceeds 3% of net assets. Regional weightings are held to within 10% of the MSCI EAFE index, and country weightings are similarly managed.
Recently, the fund shifted the sub-portfolio allocations slightly, moving some assets from the two European segments to the technology area, where management believes there are growth opportunities. In particular, Intel and NetApp were added to the fund. In the European portfolios, positions were added in Essar Energy (an Indian infrastructure play) and British Petroleum, following its sharp decline.
In each of the eight calendar years since its inception (2002-2009), the fund ranked no lower than the top third of its Morningstar foreign blend category. The 2010 year has been an anomaly, however, as the fund, with a -4.9% return, is lagging three-quarters of its peers. Still, its great track record suggests it will recover. Henderson Global Investors, 201 Bishopsgate, London EC2M 3AE, United Kingdom, (866) 343-6337, Minimum Investment $2,500, 1,000 IRA.
Nuveen Tradewinds Global All-Cap Plus (NPTAX): This Nuveen offering, as the name explains, can invest globally (i.e., including in the US) and in any market capitalization range. But what about the "Plus?" That refers to the additional return the managers seek by "taking short positions in stocks we believe are expected to underperform and using the proceeds from these short sales to take additional long positions in stocks that we believe will outperform."
Fund manager David Iben and his team use a value approach. They thoroughly analyze a stock's valuation, including extensive cash flow and balance sheet analysis. To be considered for purchase, a stock must be undervalued, but also possess a catalyst (new management, corporate restructuring, industry consolidation, etc.) that will improve profitability or valuation. A stock must also have a strong franchise or competitive position within its industry. The manager also seeks to capitalize on short-term market inefficiencies - such as investor overreaction, misperception, or short-term focus - in making investments.
Overall, the fund targets 130% of assets in long positions and 30% short positions, and recently was 117% long and 29% short with the remainder in cash. The top long positions in the portfolio are Japan's Nippon Telegraph and Telephone (5.7% of assets), and gold producers Newmont Mining and Barrick Gold (5.2% and 4.8% of assets, respectively). The largest short positions hail from the US and are retailers or restaurants: AutoZone (-5.5% of assets), Urban Outfitters (-4.7%), and Chipotle Mexican Grill (-3.4%).
Thus far, the fund has performed well compared to its Morningstar world stock category. In its first full year of operation, 2009 it surpassed 95% of its peers, and through July 30 this year, a 1.99% return places it in the top 15% of the category. Nuveen Investments, 333 W. Wacker Dr., 32nd Flr, Chicago, IL 60606, (800) 257-8787, Minimum investment $3,000; $1000 IRA.
Editor's Note: Walter Frank is Chief Investment Officer/Chief Economist for MONEYLETTER.com, 479 Washington St., P.O. Box 6020, Holliston, MA 01746, 1 year, 24 issues, $180.
