Moffett, lead portfolio manager and chief international strategist with Scout Investments, a division of Kansas City-based UMB, also said the United States would lead the world in terms of market performance.
“We’re slowly getting stronger,” he explained. “Housing is improving. New household formation is one of the leading indicators of recovery, and more kids are moving out of their parent’s basement.”
He noted there’s “always the risk of politicians screwing it up, but I’m fairly optimistic” about the economy.
As the geographic regions he likes, Moffett named Mexico “across the board,” as well as Latin America, although he noted he’s “less enthusiastic about Brazil than I’ve been recently, due to a subtle change in the political situation there.” He also said China’s slowing economy would negatively impact Brazil, since minerals for steel, a major export of Brazil, would be less in demand.
“For that reason, we’re cautious about mining stocks,” he added.
In China, he said valuations are looking more reasonable as the economy slows.
“But we stay away from the state-run enterprises, like the oil companies, because they’ll do things strictly for political reasons. We look for more non-strategic investments. It’s our form of chicken investing,” he added with a laugh.
He has 100 stocks currently in the international portfolio with a 20% annual turnover rate, which equates to full portfolio turnover every five years.
“We look top-down when deciding where to invest, and bottom up when deciding what to invest in,” he said.
As to where else he’s finding alpha, he noted the fund “is not in the frontier [markets] yet, but 15% to 16% is in emerging markets,” and mentioned that the firm just launched an emerging markets fund one month ago.
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