Jean-Marie Eveillard, one of the most successful Global Value Investors in the last 25 years, was interviewed today on Consuelo Mack's Wealthtrack. The video can be viewed here. While the interview offers a glimpse of Eveillard and his outlook and expectations, a look at his portfolio and his current holdings is far more telling. But first, a bit of background info on Eveillard.Who is Jean-Marie Eveillard?
The 67-year old Frenchman who resides in New York managed the $13.1 billion First Eagle Global Fund (SGENX) for 26 years before retiring in 2005. Earlier this year he returned to his post after the previous fund manager, Charles de Vaulx suddenly resigned. Eveillard has earned a reputation as a cautious, conservative and patient value investor that refuses to overpay for growth potential. Morningstar named him International Stock Fund Manager of the Year in 2001, and in 2003 he received Morningstar's Lifetime Achievement Award. Read on to discover why.
What is First Eagle Global's Long Term Performance?
The fund's long term performance is extremely impressive. It absolutely trounced the relevant benchmarks, with 10-year annualized returns that are more than double the returns of the benchmarks referred to below.
When compared to its peers over the past 20 years, Eveillard's fund outperformed the average global fund by an average of 5% per year.
The fund trailed the market from 1995 to 1999 as a result of Eveillard's reluctance to follow the crowds into the 'Internet hype'. Those investors in his fund who were willing to persevere through this period were well-rewarded in 2000, 2001 and 2002 when the fund returned 10% each year, while the overall market was losing value.
It is worth mentioning that Professor Bruce Greenwald of Columbia University (Buffett's Alma Mater, and where Benjamin Graham, 'Father of Value Investing', taught) recently joined the fund as Director of Research. He is also the author of 'Value Investing: From Graham to Buffett and Beyond'.
What Can We Learn From the Fund?
The very first thing we can observe is that Value Investing as an investment philosophy works - you've just got to possess the gumption, stamina and patience to ignore the what the market is doing, and focus on the long term. Now let's see how this was implemented in this fund:
The very first thing we can observe is that Value Investing as an investment philosophy works - you've just got to possess the gumption, stamina and patience to ignore the what the market is doing, and focus on the long term. Now let's see how this was implemented in this fund:
Asset Turnover: The fund's asset turnover is 29%. Basically this means that 29% of the fund's portfolio is sold within a year. In other words, the fund holds each stock on average between 3 to 4 years.
Asset Allocation & Current Holdings: An examination of the fund's asset allocation and top holdings reveals much about Eveillard's near-term market outlook and expectations.
(1) The fund holds 20% of its assets in cash. This suggests that he is waiting for a correction and is now 'keeping his gun powder dry', and / or that he is unable to identify relevant value investment ideas. Whatever the reason - this suggests that he believes the market is expensive and is due for a correction.
(2) The funds top 3 holdings are:
- Gold (3.37% of the portfolio) - which is inversely correlated with the market (it moves in the opposite direction to the market). Gold is often viewed as an ideal investment option when seeking to protect one's investment portfolio in the event of a market downturn.
- Berkshire Hathaway (BRK) (2.51% of the portfolio) - Warren Buffett's investment holding company, which also holds $47 billion in cash (24% of Market capitalization). Berkshire is the ideal company to be invested in when the overall market outlook is uncertain and a when a market correction is anticipated.
- Costco Wholesale Corp (COST) (2.21% of the porfolio) - This high-volume, no frills warehousing chain offers the lowest prices and widest variety of products to consumers, and will benefit in the event of a weak global or US economy and when the market weakens. Costco, like Gold and Berkshire also represents an ideal defensive investment. Charlie Munger (Warren Buffett's partner), has difficulty hiding his zealot-like admiration for the company and serves on its board. In the 1999 Berkshire Annual Shareholders' Meeting he gushed:
"I'm such an admirer of the Costco culture and the Costco system that I'm not sure I'm totally rational.I love the place."
Eveillard Quote:
"The success we've had over the years has a lot to do with the fact that we don't try to keep up with the Joneses on a quarterly or even past-year basis. It's the willingness to take short-term pain that distinguishes us from other investors. We're looking to reward our long-term investors".
- from "Back in First Eagle's Nest", MarketWatch, Dow Jones, March 26, 2007Further Reading:
The August 2007 edition of Financial Advisor Magazine features a 7-page article titled "The World According to Eveillard". In it, he outlines the Value Investing philosophy and why Value Investing is so difficult. You can read it here.
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