Frank's Favorites for Global Growth

10/17/2017 5:00 am EST

Focus: FUNDS

Walter Frank

CIO, MONEYLETTER

Fund expert Walter Frank has added two new funds to his model portfolio; both offer international exposure. Here's the latest from the editor of MoneyLetter.


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American Century Emerging Markets (TWMIX)

Lead portfolio manager Patricia Ribeiro and the investment team search for companies on the cusp of accelerating earnings growth — before the broad market recognizes this potential.

That growth is often the result of a catalyst for change, such as a new technology, a new product, cost reduction or management change.

Typically, the fund invests in about 80 to 90 stocks, with about a third of assets in the top ten holdings. Recently, the portfolio had 80% of assets in large caps.

Looking at sector weightings, the fund was most overweight in technology and consumer discretionary and underweight in financial services.

Top holdings include Samsung Electronics (SSNLF), Tencent Holdings (TCEHY), Taiwan Semiconductor (TSM), and Alibaba Group (BABA). The fund's 36.8% gain in 2017 through September 1 bests 97% of emerging markets funds.


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Fidelity China Region (FHKCX)

This fund's investment focus is on stocks of companies having their primary business in China, Hong Kong, or Taiwan. Fund manager Robert Bao utilizes a two-fold approach.

First, about 75% of assets go into core holdings — chosen with a growth-at-a-reasonable price (GARP) strategy. These firms will demonstrate high and consistent earnings growth, strong balance sheets and robust internally generated free cash flow.

Representative of the fund's core holdings are Tencent and Alibaba and Hon Hai Precision (HNHPF), a supplier for Apple (AAPL) products.

The final 25% of fund assets are devoted to opportunistic investments including turnarounds, firms selling at extreme discounts, and cyclical firms which all must have catalysts that will enable fundamentals and earnings to improve.

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