Thomas Russo, Gardner, Russo & Gardner partner, provides insight on where to find significant value in overseas companies.
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Here’s a round up of hedge funds’ May returns
Tyro Absolute Return Fund was down 1.5% for May. The fund's main contributors in May were Super Micro Computer, which gained 1.6%, Shyft Group, which was up 1%, and GCI Liberty, which gained 1%. Detractors in May include Recro Pharma, which fell 2.6%, index shorts and hedges, which declined 2%, and DXC Technology, which was Read More
we focus on europe in morning as we said given the ecb meetings everyone is talking about. joining us from london is tom russo. he oversees 5 billion in assets under management. do you think initially we see anything substantive or do we need to listen closely to the call afterwards, tom? well, i was sised when draghi came out several days ago and said that the ec would do everything they could to support the euro.the market was completely aligned on a bearish euro trade, and over time, i think, the markets will recognize that there’s some strength left in the euro. so i don’t know what they’ll say in the meeting. you can see how the market will react just three days ago when the euro strengthened sharply against theectations itwould continue downward. i’m focused on the companies, the companies that trade through europe and less on the currency.i guess the question is, just for the markets new jerk reaction on this, there were a lot of people that said last week, okay. we hear his words. now he has to show us the money and do something in terms of real action. i guess, do you expect him to do something like start buying bonds today and if he doesn’twhat will the market reaction be? boy, i don’t have any idea atall. it’s a complicated process. the euro will find its own. i think germany still has an economic interest in keeping it together, and they’re the core country to bank on. but it’s a puzzle. as an investor in equities, we’re exposed to this question. really, the european companies it that we own are so global that the euro becomes a rather secondary issue thagrowth in their businesses and ability to stref in foreign markets away from europe where they receive stronger currency earnings overdecades to come. that’s what we’re focused on. tom, it’s miles liddell. there’s been a flight to quality. what have you advised your clients in that respect in how to shift your investment themes in either categories or asset classes as a result of what’s transpired in europe? we’ve really stayed the course.my goal is to find businesses that can invest against theirconsumer brands with the free cash flow for mature marketslike europe and the united states. to take the cash flow anddevelop the consumer brands in developing emerging markets,china, india, vietnam, et cetera. i concentrate on food companies, in which case you see nestles. very sizable holding and unilever is part of that. we focus the on the beverageindustry and have sizable positions in the brewing industry around the world. heineken, sab miller, abi, anheuser-busch and the spirits history. all of these companies have storied european brands that have appeal around the world and the companies are busily at work investing behind the capacity toserve the needs as the parts of the world grow in domesticproduct and consumer disposable income. that’s the business we’re involved with. it hasn’t changed for a long time. have you changed since brazil, russia, india examine china’s growth rates have declined recently? has that changed your philosophy about investing and where you go from here? no. i think the penetration in those markets remain so low that over a long period of time we have enormous white space to invest in.actually, the great news in the downturn is that those companies that maintain a long-term ambition are able to invest better in those markets as their competitors flee. nestle bought pfizer’s infant nutrition business. they acquired — which has a large business in china. they acquired a chineseconfectionary company and beverage company, and they did it over the past 12 months when the rest of the world was fleeing china for fear of the slowdown in housing and the government balance issues. nestle is making great commercial headway in that market during the downturn. all right. it seems true in othermarkets by other companies. thanks. we appreciate it.