The Tweedy, Browne International Value Fund has excelled over the long term, following a strategy inspired by Benjamin Graham.
Some international mutual funds are more diversified than others. In fact, some are heavily weighted to the U.S. technology stocks that have driven the S&P 500’s stellar returns over the past decade. This can make their performance comparisons with international stock indexes seem a bit slippery.
But you might also be well served with exposure to companies outside the U.S., and a value focus can further diversify you away from high-flying tech stocks. The fund’s average annual returns have trailed those of the index for five and 10 years but have exceeded them for all the other periods shown. And the differences can really add up. For 20 years, the fund’s average annual return through Aug. 21 was 7.0%, compared with 6.5% for the index. But look how those numbers correspond to total returns for the full period:One reason to emphasize long-term returns is that this management team has been with Tweedy for decades.
He continued: “Ben Graham had the idea of two prices — the stock price and the intrinsic value of the company, or what it would be worth if 100% of the company would be sold to a knowledgeable buyer at arm’s length.” Wycoff went on to explain that the fund isn’t fully hedged for currency risk because of the international nature of many companies’ businesses: “A company such as Nestlé, with all sorts of U.S. earnings, has an implicit hedge. That translates back into the Swiss franc. So we don’t hedge the U.S. dollar earnings component for foreign companies.
“We have just been through a 10-plus-year outperformance for U.S.,” Wycoff said. “If the past is prologue, and that structure remains intact, we could be in store for a period of outperformance” for stock markets in developed countries outside the U.S. Wycoff emphasized the importance of having skin in the game. “We eat our own cooking,” he said, with $158 million of the fund managers’ own money, or that of family members of the firm’s employees or partners, invested in the fund.
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