Tom Russo: The First Emerging Market Value Investor?

Updated on

Thomas A. Russo has been a partner at Gardner Russo & Gardner since 1989. The hedge fund has over 5 billion under management and Russo personally oversees 4 billion as general partner of the Semper Vic Partners and Semper Vic Partners (Q.P.) limited partnerships, as well as in individually managed client accounts. Prior to joining Gardner Russo & Gardner, Russo was at the Sequoia Fund. Mr. Russo is a graduate of Dartmouth and has an MBA and a JD from Stanford.

Tom Russo is one of the most unique value investors alive. I have described him as a mixture of Warren Buffett and John Templeton. Russo likes companies with very strong brands, which have the ability to re-invest their cash flows profitably. Russo likes companies like Nestle, and  Phillip Morris International. Russo looks for companies which have exposure to the growing middle class in the emerging markets.

Below is an excerpt from ValueWalk’s exclusive interview with Tom Russo, which gives a good flavor of Russo’s style:

I think our businesses have shown over time that they have pricing power which is because of the strength of the brand. That is extremely important long term because it is that pricing power that accompanies a product’s perceived indispensability in the minds of the consumer that allows our business to raise prices in sufficient amounts to offset the pressure of commodities and inflation.

And a good example of this occurred when I was once on a plane. I had a colleague sitting next to me in an airplane who ordered a Jack Daniel’s and the steward came back and said “I am sorry. We only have Jim Beam,” to which he said, “No thanks, I would rather have water.”It is that kind of consumer loyalty that means that the brands have power—if the steward came back and said “Yes, you can have Jack for a dollar more than Jim Beam” he probably would have paid. We want to make sure we have businesses that have that pricing power.

I think by and large we just found that and the pricing power is particularly important in the developing, emerging markets because they enjoy rising consumer disposable income. Nestle and Unilever, which are two large holdings, understand that they have to go into the markets early on with popularly-priced products that are either a different variation of their Western market products or are simply sold in different packet sizes.

By using the popularly-priced product, they are able to have the price that the consumer can afford at the start and as that consumer has more disposable income, they can introduce multipacks, which increase the consumption or they can introduce more of a premium package to products which drive the aspirational consumer forward.

Tom Russo is a confirmed speaker for the www.Value Investing Congress in Omaha, on May 6th and 7th, 2012. The conference will begin after the Berkshire Hathaway annual pilgrimage, and the Markel Shareholder meeting, where Tom Gayner will be speaking. The line-up should be great, as many high profile investors like Prem Watsa go to Warren Buffett’s Annual meeting every year . I attended the last conference, and it was not only great for investment ideas, but one of the best networking venues for analysts, HNWIs, people in business development, financial media etc.

There is a special deal; Value Walk readers will receive a discount of $1,300 off the regular price, however it expires on Thursday 3/15. As the conference gets closer the discounts decrease significantly.

Discount Code:  S12VW1. Just follow the link below and use the discount. Buy a (belated) holiday gift (or rather an investment that will likely yield rewards) for a loved one, friend neighbor or even yourself. But act soon before the huge discount expires: Code:  S12VW1

Leave a Comment