Investors wanting to add an international (non-US) component to their portfolios should look to international money manager WHV Investments’ International Equity strategy as a viable option.
The WHV International Equity strategy invests primarily in large-cap international growth stocks, with a belief that the most attractive global economic sectors can generate superior investment performance.1
As a performance benchmark, the strategy uses the MSCI EAFE Index, which represents developed markets in Europe, Australasia, and the Far East.2
To request detailed performance information on the strategy or to compare the performance of the WHV International Equity Strategy to other international strategies, please call one of our Wealth Managers at 1-800-541-7774. Alternatively, you can request the information here.
The WHV International Equity Investment Process Part I: When to Buy
The WHV Investment Management focus is on finding global sectors they think will drive relative outperformance over time. With this guiding philosophy they take a top-down sector approach to investing, looking first for attractive sectors before considering individual companies or countries.
The WHV International Equity investment process happens in five steps:
1) Analyzing the relative attractiveness of 10 global economic sectors
2) Examining the potential of 67 industry groups
3) Analyzing the attractiveness of 51 countries
4) Researching a universe of 700 foreign equity securities
5) Constructing a portfolio of 30 to 60 stocks of economic sectors with the potential for superior earnings growth.
The weighting of each individual stock in the portfolio is based on liquidity, upside potential, and downside risk, and each company generally exhibits earnings/growth momentum as well as possibility of earnings surprise.
The WHV International Equity Investment Process Part II: When to Sell
Portfolio managers of WHV International Equity are constantly assessing factors that may trigger the need to sell a stock out of the portfolio. There are three factors in particular for each stock that WHV managers watch closely: relative overvaluation; deterioration of sector, industry, region, country, or company fundamentals; and/or concerns regarding accounting or management.3
WHV International Equity Portfolio Characteristics
As of December 31, 2013, the top-down global sector approach has netted a portfolio of 34 stocks with a weighted average market cap of $59.1 billion. Most of the stocks come from the global Energy, Materials, and Industrials sectors, with those three sectors accounting for 73.1% of the entire portfolio. The portfolio has no weighting in the Information Technology, Utilities, Telecommunications, or Consumer Discretionary sectors.
A sampling of current companies in the portfolio includes Canadian Pacific Railway, Schlumberger, BHP Billiton, and Rio Tinto.1
Why So Much Portfolio Allocation to Energy, Materials, and Industrials?
The bias toward these three sectors is tied to WHV’s outlook for global economic growth. WHV believes that Emerging Markets, with a population of 6.0 billion, are the world’s growth engines. With an industrial revolution occurring in the Emerging Markets, there is an increased demand for energy and natural resources, which are long-term supply constrained.
By coupling rising demand for energy and natural resources with long-term supply constraints, WHV arrives at their thesis for favoring Energy, Materials, and Industrials.
Does the WHV International Equity Fund Make Sense as Part of Your Portfolio?
Investing in international equities involves different types of risk compared to investing in U.S. equities, so it’s important to discuss this strategy with your financial advisor.
You also want to consider whether you already have an international component and/or already have a portfolio heavily weighted to Energy, Materials, and Industrials. If that is the case, your financial advisor may need to make some adjustments in other parts of your portfolio to make room for the WHV International Equity strategy.
In any case, it’s important to gather more information about the strategy and to speak with an investment professional about whether it might make sense for you. At WrapManager, our Wealth Managers are equipped with the resources to educate you more about the WHV International Equity strategy. Give us a call today at 1-800-541-7774 to learn more, or click here to request more information.
Sources:
1 WHV Investments
2 MSCI
3 Informais Investment Soluitons
Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional.
