Judgement underpriced U.S. stocks is becoming increasingly difficult, giving value-oriented investors diverse reasons to look abroad. The Davis International Fund (DILAX) has directed average annualized total returns of 33.5%, 13.1%, and 9.8% during the former one, three, and five-year periods through March 14, according to Morningstar Inc. For these days, the fund beat the benchmark MSCI All-Country World Index Ex-USA by usually annualized margins of, respectively, 12.0, 5.2, and 3.7 percentage points, and its confreres in Morningstar’s foreign large growth category by 7.9, 4.4, and 1.9 part points.
Fund manager Danton Goei describes himself as a value investor and broke Barron’s that “We want decades-long themes as tailwinds at our backs.” Four picks that he deliberate overed with Barron’s are: global media conglomerate Naspers Ltd. (NPN.South Africa), jet mechanism maker Safran SA (SAF.France), plumbing and heating supplies distributor Ferguson PLC (FERG.UK), and Hollysys Automation Technologies Ltd. (HOLI), “the prime Chinese leading industrial automation company” in his opinion.
Naspers
Naspers is the Davis Intercontinental Fund’s largest holding, at 4.94% of the portfolio, per Morningstar. Goei evinces that it is mega cap with a total market value of $120 billion, while the value of its sections is more than twice as much. For example, he notes that Naspers has a 33% hazard worth $175 billion in Tencent Holdings Ltd. (0700.Hong Kong), a Chinese presence with nearly a billion users of its WeChat messaging app and WeChat Pay transportable payments app. Computer gaming is very popular in China, and Goei augments that Tencent is the leading provider there.
Naspers also owns 15% of Flipkart, one of the top two e-commerce companies in India, and a extensive leader in online classified advertising. If that were not enough, Goei adds, Naspers is the top vassal video provider in Africa, with 10 million subscribers.
Safran
Jet apparatus manufacturing is their biggest business, and Goei calls their 50/50 cooperative venture with General Electric Co. (GE) to produce the CFM56 jet engine “one of the great prosperity stories in aviation history.” This engine has a 75% market equity among narrow-body aircraft such as the Boeing 737 and the Airbus A320 that are the “workhorses” of aviation worldwide, he claims, and Safran’s only two competitors focus on engines for wide-body aircraft. More than that, Goei adds, Safran has eight years of sales booked already, which then sire decades of follow-on revenues from service and parts.
Ferguson
While its shares are heel overed in London, Goei notes that Ferguson derives 85% of its matter in the U.S. market, after divesting its European operations. It has 18% of the U.S. plumbing and arousal supplies market and is growing, he says, stocking 250,000 products (SKUs) from 52,000 suppliers for 1.1 million consumers.
Contractors prefer to pick up supplies in person from sales loopholes staffed by knowledgeable people, rather than order them online, Goei marks. Because of its reach and specialization, Ferguson is doing very well against big antagonists such as The Home Depot Inc. (HD), he adds. The company has 10 distribution centers and 1,400 places across all 50 states, the Caribbean, Puerto Rico, and Mexico, per its website.
Hollysys
While China has befit a manufacturing superpower based on low labor costs, that is changing. Chinese wages are beginning rapidly, Goei indicates, forcing Chinese companies to automate. While U.S. and European visitors have been the world leaders in this regard, he expects the Chinese oversight to favor domestic companies, especially for systems that control high-speed scold lines and nuclear power plants, both being areas in which Hollysys specializes. Goei apprises Barron’s that Nasdaq-listed Hollysys increased earnings by 32% year-over-year in its most fresh quarter, and is projecting 40% to 50% growth in the new year.