The managers of the First Eagle Global Fund seek out resilient businesses in beaten-down sectors. via Barron’s 

H/T Dataroma

When discussing the prospect of a down market, Matthew McLennan and Kimball Brooker are nearly giddy.

The managers of the First Eagle Global Fund (SGENX) search out companies that have a “margin of safety,” meaning the stocks trade at a discount to what McLennan and Brooker have determined to be their intrinsic value. However, with both the Standard & Poor’s 500 and the Dow Jones Industrial Average reaching record levels, the value opportunities have been hard to come by.

“We view our key asset as temperament. We’re very patient long-term investors,” says McLennan. “In ebullient markets like the one we’ve seen, we are happy to be a net seller of overpriced securities.” With the lack of value prospects as of late, the $50 billion fund currently has a 20% allocation of cash and another 9% in gold bullion and gold miners. “We’d look to put the cash to work in a more-distressed business cycle, and we view gold as a potential hedge against the frailties of the monetary architecture.”

First Eagle Global Fund: Oracle, National Oilwell Varco and Bank of New York Mellon are good buys

While the environment might not be ideal for the value investors, McLennan and Brooker still think that Oracle (ORCL), National Oilwell Varco (NOV) and Bank of New York Mellon (BK) are good buys right now. “We are tending to emphasize businesses that have resilience in terms of their market position and generation of free cash flow, or that already incorporate some element of cyclical-distress in their valuations,” says McLennan.

The fund has a successful long-term track record. Over the last 15 years the fund has topped 98% of its peers, with an average annual return of 11.57%, according to Morningstar. Over the five-year and 10-year periods the fund ranks in the top decile in performance. This year the fund is up 3.72%, well behind the 12.65% of the broader market but ahead of the 1.97% average return of its category. Barrons.com asked McLennan and Brooker to share five global stocks they like.

First Eagle Global Fund: Portfolio holdings

Oracle:

National Oilwell

Fresnillo:

Groupe Bruxelles Lambert:

 

First Eagle

TFull article via Barron’s