Charles de Vaulx

Great stocks listed in France, says fund manager

High taxes make for a tough business climate in France, so only the “very best” companies and stocks survive, said Chuck De Lardemelle, founding partner International Value Advisers.

Cashing in on for-profit education

We pay attention to downsize risks, says Chuck De Lardemelle, International Value Advisers, explaining why he thinks buying shares of DeVry is a smart bet.

Transcript:

we manage mutual funds as if they are family trusts, basically and pay more attention to the downside risk than the upside and we try to compound at a reasonable rate over a full cycle. that’s a strategy that people probably flock to a lot more years in 2008 and after that. that’s correct. when you say markets taking off like they did last year, how do you kind of weigh the two? well, people still remember the crisis. i think we’ve done a very good job educating our investors. they understand the bull market will lag a little bit. but this year with only 55% in equities, we’ve managed to catch about 80% of the upside in the index and the absolute performance still very respectable, you know, more than 16%. is it a lot harder to find values, though, when the stock markets have risen so rapidly? it is. and we are raising cash at this point. we believe that all asset classes tend to be fairly expensive today. it’s probably towards the late inning of a great bull market. i wouldn’t call this a bubble yet because we don’t see disruptions. we see different asset classes or being 10%, 15% overvalued, but it’s not crazy and we don’t see the dislocations you usually see with bubbles. we do see easy credits in the high yield bull market. we see more in flows into equities. we see variations. it’s time to be a bit more cautious. there are still opportunities out there. we have president plosser with us. we’ve been talking about the fed strategy. is it impossible to fight the fed at this point? well, you know, we are not macro investors. we’re tryingo determine the value of a business, what a business is worth. and whether interest rates or short-term interest rates or zero, 1%, 2%, 3%, doesn’t change the businesses, it can change the valuation in the stock market, but not the values. and their fundamental values will be being reflected in stock markets. let’s talk about a stock you do like, devry. yes. it’s misunderstood by the market. those stocks have suffered mightily in the last few years. there’s reform. reform long overdue to make the product better to make sure that students don’t default on their loans and get a proper education. it’s definitely the right thing to do. as a consequence, these businesses had to shrink their top line. also, an interesting company, they do very well. if there’s a recession, more people go back to school. there’s a mix of more regulation. the wrong part of the cycle for the stocks because more people are going back to work. what’s not understood about devry is you have medical schools. and in the medical schools, there hasn’t been any problem whatsoever. no defaults. the number of students continues to go up, the number of campuses, they continue to open up. and you look at that segment alone, it’s almost worth the stock price and you get the rest for free and the rest will eventually come back.