Jan. 25, 2005 — The $111-million Evergreen Global Opportunities/I (EKGYX) can keep up to 70% of its assets in U.S. stocks, or it can invest the same amount abroad, depending on where its managers see the best opportunities.
Lately, domestic equities have accounted for only about a third of the fund’s holdings. Francis Claro, who oversees the foreign part of the portfolio, says Evergreen Global been favoring international companies to take advantage of the weak U.S. dollar, and because their stocks are more attractively valued.
The stock mixture for the institutional fund (a retail version is also available) resulted in a gain of 23.7% last year. That put it ahead of the average global equity fund, which returned 19.7%. The Evergreen fund has stayed in front of similar offerings over longer periods as well. For the five years ended in December, it returned 3%, on average, versus a gain of 0.3% for its peers.
In picking stocks, Claro looks for financially sound, growing companies, whose shares strike him as bargain priced. He leans towards those with improving earnings, sales, margins and balance sheets. He wants to buy stocks that are trading below their historical valuations, and for less than shares of a company’s competitors.
At the end of last year, the stocks in the fund’s portfolio sported a price-to-earnings ratio of 17.2, and a price-to- book-ratio of 2.6. By comparison, similar funds had multiples of 20.36, and 2.79.
Businesses that Claro thinks may benefit from a restructuring or a management change pique his interest, too.
Both managers don’t mind betting on unprofitable companies if they think that condition is only temporary.
Like his colleague, Bisson, who runs the domestic part of the portfolio, scans for companies that fatten their top and bottom lines at an above-average rate, and he wants them to have a competitive edge that will enable them to keep growing. Bisson, who puts investments into three categories, describes these as “core” companies.
Bisson also keeps an eye out for companies for which analysts’ estimates are low but increasing, and stocks that have have pulled back because of a problem he believes will prove short-lived.
The fund hunts for investments among small-cap stocks.
Claro says he and Bisson are willing to invest in companies that aren’t widely followed by analysts and whose shares aren’t very liquid and “might take a little bit more time to bear fruit.” Stocks that are largely ignored by Wall Street can take off when big brokerage houses begin tracking and touting them, he pointed out.
“We feel that we’re in a universe that has more inefficiencies,” Claro said. And as investors, the managers “try to exploit these.”
One stock Claro likes is Bull SA, a French computer and software maker that also provides information technology services. The company is one of the fund’s top holdings.