Value still works, says one mutual fund manager, but investors have to be willing to look for it.
Even though analysts from many firms, including Goldman Sachs, have started lamenting the “death of value” after a decade-long period of underperformance in the strategy in the U.S., there’s still life in the world’s first investment factor if you look abroad. The best opportunities for value investors are not in the U.S. or in emerging markets, but Europe, says David Marcus, CEO and founder of Summit, N.J.-based Evermore Global Advisors.
“The U.S. has been hitting new highs over and over and over again, but the other markets are way behind, not just because of where valuations are, but also in how they’re taking advantage of the environment to restructure themselves and focus on their businesses,” says Marcus.
Marcus manages the Evermore Global Value Fund, a $484 million mutual fund that takes a go-anywhere approach to find value opportunities throughout the world. Trading under the ticker EVGBX, the fund had posted 13.65 percent five-year returns as of Wednesday, and returned 7.67 percent year to date.
The fund’s go-anywhere approach allows Marcus to find the opportunities he likes without worrying about meeting allocation mandates to geographies or sectors. Currently, 72 percent of the fund’s assets are allocated to Europe, he says.
“We have no preconceived notions of what we want to do,” says Marcus. “We get to go to where the best opportunities are.”
His fund invests in no more than 40 companies, and carries a 150 basis point expense ratio.
His model does not assume that a company is growing. Instead, Marcus looks for companies trading at a discount to his calculation for their intrinsic value, companies that also might be going through strategic changes or business transitions that would unlock further value.
According to Marcus, most opportunities are currently in European developed markets.
“It’s been tough in Europe,” Marcus says. “Before the financial crisis, it was not set up to be conducive for companies to restructure themselves; there were rules and regulations set up to keep people employed and receiving a paycheck. A lot of those regulations changed during the crisis, and companies found it was easier to streamline their operations.”