Going Global for Growth and Income

07/20/2017 2:50 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

Bob Carlson is a leading expert on retirement investing, recommending portfolios that are diversified among bonds and stocks, growth and income ideas, and domestic and global positions. In his aptly named, Retirement Watch, he reviews two of his global holdings.

Among our largest positions is WCM Focused International Growth (WCMRX). The fund first finds growing companies around the globe with little or no debt. Then it determines if the growth is sustainable.

One indicator of sustainable growth is that the firm’s business benefits from key global trends, such as the growth of the middle class, increased use of technology, increased outsourcing and others.

The analysts also look for signs the business has some protection, or what the firm calls moats. The moats can be legal or regulatory restrictions, economies of scale and difficulty changing suppliers, among others.

The fund also assesses the quality of management. Once the fund buys a stock, it tends to hold the stock for years. The turnover rate is only 26%. The fund returned 20.38% for the year to date.

It recently owned 32 stocks and had 41% of the fund in the 10 largest positions. Top sectors in the fund are technology, consumer cyclical and health care.

Another non-U.S. position is DoubleLine Emerging Markets Fixed Income (DBLEX). The yield is 4.08%.
The fund develops an economic outlook for each country.

Then, it decides which countries it wants to be invested in and which it wants to avoid. It doesn’t buy a security simply because it is in an index.

For example, until a year or so ago the fund owned almost no sovereign bonds, preferring to own corporate
and quasi-sovereign bonds. Now, about 26% of the fund is sovereign bonds.

The other main sectors in the fund were oil & gas (16%), banking (12%), utilities (10%) and telecommunications (6%). DBLEX hasn’t taken any currency risk for years. All the bonds purchased by the fund are denominated in U.S. dollars.

The largest recent country exposures were Mexico (15%), Chile (10%), Brazil (10%), India (6%) and the Dominican Republic (5%). In recent years the fund was invested almost entirely in Latin America markets. In 2017, it’s been diversifying to other regions.

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