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"Price" is Right for Global Growth
04/28/2006 12:00 am EST
Sheldon Jacobsis a one-stop shop for fund investing. His No Load Fund Investor covers all fund families and offers model portfolios for a variety of goals, from growth to retirement. Here he looks at a "Best Ideas" fund that is his favorite in the global stock arena.
"Global stock funds invests in the US and abroad, theoretically providing investors with an expert's allocation among countries as well as the simplicity of combining foreign and US stocks in one portfolio. We caution that in general, global funds have not been among the top-performing funds, the better global sock funds can be appropriate for many investors. Every portfolio needs some international exposure. If you don't feel like researching international funds, with all their complexities, then adding a global stock fund is a good way to achieve that goal.
"In particular, if you worry about currency fluctuations (when the dollar strengthens, international funds falter), it's a great way to off-load these worries onto a professional money manager who can make the appropriate adjustments. Similarly, if you don't care to own a large number of funds, a global stock fund can replace separate allocations in US and international holdings. Over the past year, one global stock fund has given us the most confidence, T. Rowe Price Global Stock (PRGSX).
"Price Global Stock has been around for a decade. But it became interesting only last April when T. Rowe Price changed the fund's investment process, philosophy, and management structure. Instead of a fund whose assets were split between US and foreign stock manager who performed their own analysis, Price Global Stock became a growth oriented "best ideas" fund overseen by one expert portfolio manager.
"Price's analytical team is large (80 analysts worldwide), experienced, and geographically diverse. We appreciate Price's investment philosophy for growth investing, which manages risk by incorporating substantial sensitivity to valuation. Finally, we think a superior manager can improve upon a firm-wide "best ideas" process through savvy portfolio construction and his or her own investment preferences.
"In this case, Rob Gensler is a superior manager. Before taking over Price Global Stock, his flagship role was running the Price Media Telecommunications fund from 2000 to 2005, during which time his former charge thrashed most other telecom stock funds. He also boasts considerable success with Price Global Technology, which he continues to manage. Instead of doing his own research for Price Global Stock, Gensler picks from among the favorite growth stocks of Price's analyst corps and portfolio managers.
"He then filters these favorite growth stocks through his own investing approach, seeking companies that can thrive in a global economy defined by moderate growth and rapid, dynamic change. He especially prefers highly innovative companies, wherever they are located, that adopt the "best practices" of their industries more quickly than their competitors. By prospectus, the fund normally invests in at least five countries.
"And while its natural to expect Gensler to favor stocks in such traditional growth areas as technology, telecom, and healthcare, he will invest in whichever industries he and Price's managers can find the best growth opportunities. In the emerging markets and parts of Europe, for example, financial services companies represent some of the best current opportunities, as demand swells for consumer credit, such as mortgages, car loans, and credit cards. In the fund's portfolio, its largest weighting at 27.6% is in financials, followed by 14.5% in consumer discretionary stocks.
"The fund is likely to have moderate risk and volatility over time. Gensler diversifies the portfolio among 90 to 100 stocks, limits emerging markets exposure to a maximum of 20% of assets, and keeps the sector weightings with reasonable boundaries. Recently, North America represented 46% of assets, while Europe was 18%, Pacific Rim (ex-Japan) was 10.8% and Japan was 9.5%. The fund currently has about $250 million in assets, so it has plenty of room to grow. We note that there is a 2% redemption fee on shares sold within three months of purchase. Over the past 12 months, the fund has gained 30.4%, tops in the Global Equity fund category."
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