The dynamics of the global financial system have changed a great deal in the two years since Motley Fool Asset Management launched its $40 million go-anywhere Epic Voyage Fund.
“When we started, people couldn’t get enough of the emerging markets, especially the BRICs, but now, the tables have totally turned and it seems that people can’t get out of those markets fast enough,” said Bill Mann, Chief Investment Officer of Motley Fool Asset Management, and Portfolio Manager of the firm’s Independence, Great America, and Epic Voyage Funds. “The BRICs have been among the poorest performing countries in the world, in fact.”
Mann, though, doesn’t follow the global herds.
Although the Epic Voyage Fund and Motley Fool’s Independence Fund invest globally, “we don’t consider ourselves global investors, but rather investors with a global mandate,” Mann said. “That means we don’t wake up in the morning and say ‘I don’t have enough exposure to China or I need to find companies in Greece or in Belgium so I can tick off those boxes because our view is to find the best companies that are trading cheap wherever they exist.”
In fact, the funds don’t have any investments in 13 of the 23 countries included in the MSCI World Index against which they benchmark, but they do include holdings in countries like Indonesia, “which isn’t even in our index,” Mann said.
For Motley Fool, then, finding the best investment opportunities that offer growth potential means going counter-cyclically to the general direction of the stock market—something that the funds can easily do, Mann said, “because we are somewhat unconstrained in where we can go and what we can invest in.”
And due to the fact that in recent years there has been much investing along broader macroeconomic themes, there are many opportunities across the globe that the firm can avail of by simply going against the grain, Mann said.
Take Peru, for example. “It’s down 30% as people have found opportunities elsewhere, but for patient value investors like us, Peru is worth looking at now,” Mann said, “I am actually going down there in two weeks to have a series of meetings with a range of different companies that include everything from a Coca-Cola distributor to a company selling Alpaca wool.”
Face-to-face meetings are key for Mann and his team and they play an important part in determining the investment potential of companies. Take Nippon Indosari, for instance, the funds’ Indonesian investment: This is a company that holds 60% of the bread market in Indonesia, a country where increased middle class consumption is driving growth, Mann said, and it’s a highly trusted brand with a great management team that Motley Food has met with often. Ditto for HDFC Bank in India, which the team has met with 10 times already and is, according to Mann, “the best run bank in the entire world.”
“With any company, you can only tell so much by reading reports and numbers but getting to know management personally is very important for us, and because we travel a lot, we’ve also developed a nice network of people who can provide objective intelligence on companies, and they aren’t all our brokers, but include sell side researchers, university professors and even other investors, ”he said. “We actually follow a pretty simple formula here, which is ‘is something a good business, is it cheap, what are its prospects and are the right people running it.”