They could invest anywhere, but here's what they chose.
At the 2010 Morningstar Investment Conference, I had the good fortune to moderate a world-stock panel, with three outstanding managers. (Next year's conference is June 8-10, so save the date.)
We had two value managers and one growth manager, but the debate didn't often break along style lines. One the growth side was Rob Gensler of T. Rowe Price Global Stock
Kinnel: Please tell us about one of your top-five holdings, and how you came to own it.
Brugere-Trelat: We like stocks that are unpopular, too complicated to analyze, or simply not totally overlooked. And it's a Danish-based conglomerate called Maersk. It's a $34 billion equivalent market cap. It was last year probably the most heavily shorted stock in the European universe. Why? Because it's the world's largest container-shipping company. So, you can imagine how popular container shipping was over the last two years.
Well, that actually was, perhaps, one of the reasons we started to take a look at the company, and what we saw was a very large asset base, which in our view was totally misvalued by the market, who was entirely fixated on their exposure to world trade. And on top of being the largest container-shipping company in the world, carrying 10% of the world trade, Maersk is a very large oil-and-gas exploration and production company.
It is a very large food retailer through every format--supermarket, hypermarket, discount stores--across all of Northern Europe, and it is also the owner and the operator of a very large number of specialized vessels from car carriers to grain carriers, you name it--they are in LNG (liquified natural gas) carriers. And this is a company, which had been run almost like a private company by a family--the Maersk family--for many, many, many years. This a 100-year-old company--three CEOs over that period of time--and until very recently there were no investor relations operation per se at the company.
So, all these things which makes an analysis of the company more difficult actually got us to work harder, and we saw a very significant, strikingly significant gap between the then current market cap and the true value of the assets. So, that's one side of the equation because you need more than that. You need what I just referred to earlier is, what could close that valuation gap other than the macro cyclical assumption about when is the world trade going to recover?
Well, something unusual happened in the company that got us really to take that investment decision. It was the arrival of a new CEO, who was not the first nonfamily CEO in the history of the company, and somebody we happen to know for having been the CEO of a very large brewing company in Denmark called Carlsberg, which he had restructured quite successfully. The simple fact that he was called by the family to take over the reins at Maersk sent to us a very strong message that a very wide-ranging restructuring was going to take place. And lo and behold, this is happening. Undoubtedly, the price of the stock has been significantly helped by a recovery in world trade, and suddenly every sell-side analyst dusted their file and switched from strong sell to strong buy--that's fine. There is still a hell of a lot of upside in the company.