Frank's Foreign Funds

02/03/2006 12:00 am EST

Focus:

Walter Frank

CIO, MONEYLETTER

Walter Frank, formerly an economic advisor to the Bank of New England, is an expert on asset allocation, specializing in no-load and low-load mutual funds, for over 11 years. For his top fund picks, he looks to two funds offering international exposure.  

"My speculative fund pick for 2006 is Driehaus International Discovery (DRIDX). This is a fund which had a spectacular 2005 under the management of Lynette Schroeder who took over the fund in March of last year. Ms. Schroeder had previously managed American Century International Opportunity, a standout international small- to mid-cap fund. She has obviously transferred her stock picking skills successfully to her new fund. Schroeder’s style is rapid-fire stock picking, and this leads to both high turnover and successful uncovering of nuggets that explain the fund’s performance.

"A glance at the fund’s country allocation would make one wonder how the performance has been achieved. 39% of the fund is in Western Europe. Another 34% is in Japan. The Japan contribution to performance is obvious. But Western Europe? Clearly Schroeder is not shy about investing where others do not go. There are risks here, but the rewards have more than compensated for them

"Our more conservative pick is RS Global Natural Resources (RSNRX). Conservative, after being up 42% last year? Well, yes. It is all in how the fund is managed. Andy Pilara who heads the value group at RS funds, and who also manages RS Partners and Value, invests in natural resources companies using the same value criteria that he uses for his other funds. He seeks out good companies whose business is natural resources.

"He wants companies where profit growth can be anticipated, when calculated on a reasonable long-term sustainable price for the product(s) the company produces. He also wants companies that are capable of replenishing the resources they deplete in their normal activity. This fund is not a play on ever-rising natural resources prices. In fact, Pilara expects commodity prices to retreat some over the next few years. Even so, he sees increasing profits ahead for his portfolio companies. That is why we see this fund as a more conservative investment. The fund will provide diversification and should achieve solid returns in 2006."

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