His vision for starting GWS was to deliver investment strategies and wealth management services typically available at the highest levels of wealth. Today, clients benefit from these sophisticated financial services targeted to meet their unique needs.
It seems like when spring arrives, investors start hearing the same recurring stories about global finance and the economy. It’s like a scene out of Bill Murray’s movie Groundhog Day.
Think about it: First, in 2008, it was Bear Stearns’ failure coupled with the looming issues surrounding the other U.S. investment banks. Then, in 2009 and continuing through this year, we’ve been hearing more and more about the financial struggles of Greece and the rest of the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain). The news is perhaps more volatile this year in the wake of elections which have reshaped those making the decisions. And it’s not just the haves (France and Germany) and have-nots (Greece). The Netherlands, Europe’s fifth largest economy, saw its citizens resist austerity and call for new elections this September – something that has created quite a bit of uncertainty for the summer.
The real risk isn’t necessarily in European companies, though, it’s in their currency. While I certainly wouldn’t jump on Greek real estate or French banks as prudent investments, many of the European companies in our portfolios are based in those countries. The truth is that where a company is based is less relevant in today’s world. In other words, just because a company is based in Spain or Italy doesn’t mean that it, too, is suffering.
To that point, we had the chance to meet and interview Bob Wyckoff, portfolio manager at Tweedy, Browne Global Value, in our offices at Glassman Wealth Services last week. His heavy allocation of European stocks has as much to do with Europe as it does Coca Cola or Tiffany. Take Nestle, which makes much more than Kit Kats and great Hot Cocoa (Perrier, Jenny Craig, and Haagen Dazs are a few other Nestle brands you should recognize), as an example. The market for Nestle products is expanding into Asia and Africa, which makes them far less reliant on developed markets like those in Europe. That means that even as Europe continues to struggle with its unified economy, a company like Nestle could actually be thriving.
Thats helps explain why the foreign developed markets index (EAFE) is down 14.02% over the past 12 months (through May 11), but the value of the Tweedy, Browne Global fund is down just 3.59%. Their ability to invest in high quality global companies has allowed them to significantly protect during down times. To be fair, the fund’s annual average return has been 9.47% since its inception in June 1993.
What’s surprising, though, is that while Europe has been a disaster in terms of its debt and political turmoil, the Euro currency itself has been quite buoyant and stable. That said, if the Euro were to plummet (and we think it could), it would have a chilling effect on European company stocks owned by those in the U.S.
The truth is that there is no way for us to know for certain what may happen to Greece or its neighbors. But as debt concerns in Greece (and potentially Spain and Italy) continue to put pressure on the Eurozone countries, investors should consider strategies that are less dependent on currency to boost their returns.