On the downside, a stronger dollar also means a decrease in share values for U.S. dollar-denominated international mutual funds. To mitigate the impact of currency translation, Hunt will sometimes deploy currency hedges. But the portfolio is mostly unhedged right now because he believes that the dollar isn’t likely to move much over the near term. 

Hunt admits that he doesn’t see any particular catalyst that will turn the stock market tide away from the U.S. in favor of foreign countries. At best, he has hopes for “diminishing negative catalysts” as fears about China’s slower growth scenario and various political events in Europe subside. But he does have a definite opinion about which U.S. presidential candidate will be better for international markets. 

“The fact that [Hillary] Clinton is well understood in the international arena reduces uncertainty,” he says. Donald Trump, on the other hand, “is rhetorically anti-trade and against many institutions that have brought the world together since WW II. Trade is good for the global economy. Period.”

Most of the companies in the fund are tied into world trade. One of them, French drugmaker and longtime holding Sanofi, has several strong, long-term franchises in areas such as vaccines and animal health, and is very active in emerging markets. But investors often shun the company in favor of competitors, such as Merck, that have fewer employees and lower production costs. Hunt believes that more investors will warm up to Sanofi when it eventually pares back its costs and improves efficiency. 

Lower oil prices haven’t had much of an impact on the portfolio, which is light on commodity-related companies. But they have presented some buying opportunities as investors have punished companies with even a relatively modest exposure to oil prices. One of those companies is London-based Smiths Group PLC, a diversified multinational engineering company the fund first bought in early 2015. “Even though only 20% of the business was in oil and gas, investors were treating the company as if it had a 50% exposure,” Hunt says. “This was a good business trading cheaply because of a misunderstanding about the impact lower oil prices would have on the company.” 

Applus Services, an inspection service for auto emissions and industrial plants based in Spain, is another oil price play that joined the portfolio last year. Even though its only relationship to energy prices is that it inspects oil and gas refinery and storage facilities, investors fled the stock when oil prices dropped. Hunt was attracted to the company’s consistent revenue stream generated by government-mandated inspections, and felt the downturn presented an opportunity to buy shares. 

The case for Zodiac Aerospace began to emerge about a year ago, when the French maker of toilets for the aerospace industry became deluged with new orders that it was ill-equipped to handle. When production problems came to light, investors fled. “We saw a problem that was fixable,” Hunt says of his decision to buy the stock earlier this year. “Management was changing, and they were doing a better job of communicating with the public. They have the potential to fix their operations and get back on track. And if they don’t, an acquirer could come in and fix their problems for them.” 

Recent fund purchases include Cobham plc, a U.K.-based niche manufacturer of electronics with strong positions in specialized military and communications markets. Cobham’s stock came under pressure as a result of a cyclical downturn among some of its customers, and a rights offering aimed at reducing corporate leverage enabled the fund to purchase shares of the company at a meaningful discount to intrinsic values. During the spring of 2016, the fund also took a position in drug and chemical company Bayer AG, when shares sold off in response to its bid for Monsanto. Hunt believes Bayer has a strong franchise in consumer and animal health, as well as crop science and pharmaceuticals, and that the value of these businesses combined exceeds the price of company shares. “Our assessment is that on a sum-of-the-parts basis, the stock should trade at 125 to 130 euros per share. When the stock fell below 90 euros, we jumped on it.” 

First « 1 2 » Next