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By Jason Stipp | 06-03-2010 02:37 PM

Yockey: Can't Paint Europe with Broad Brush

The Artisan manager says investors can find very attractive, well-managed companies that have recognized and are well-positioned for the slower-growth prospects in the region.

Jason Stipp: There is a lot of concern, and I think the U.S. markets have been reflecting some of this concern, about the potential contagion effects that we've been reading about that some of the banks that were holding the sovereign debt may be counterparties to other banks around the world, and banks might start to worry about lending to each other. We might see another credit crisis, is some of the worries that are out there.

Also the austerity measures that some of the countries in Europe may need to take as part of this correction process that they're working on in the EU. I'm wondering your take on the potential for an even slower growth environment in Europe, which is an area that some folks thought would be kind of slow growth anyway. Do you think there is a risk that we might see economic growth really stall because of this crisis that we're seeing, and the aftermath?

Mark Yockey: I think, it really depends on the country, because as you know, the EU and the European region are composed of a lot of different countries, and they have very different dynamics. So, what you have going on in Germany is you have a pretty solid recovery going on. And that's 100 million out of 300 million people in Europe. So, that's a pretty good chunk of it. It's also the wealthiest 100 million, so that's significant.

France, nobody expect it to grow very fast anyway, and it's not going to grow very fast. But it will grow a little bit. I think, if you look at Southern Europe, places like Italy, Greece, Portugal, and Spain, they're going to have difficulty, because that's where the housing bubble was, and the real estate bubble just in the U.K. and Ireland too, you know those countries are going to – they are going to have to save some money and pay down their debt for the next few years. Just like the year in U.S.

And that's not a bad thing, getting your balance sheet in order isn't a bad thing. We don't expect the world to grow at a high rate, but we think, there will be a small growth in the 1% to 2% range in Europe, a little bit faster in the U.S., and you know that's actually fine for us.

Stipp: I'd like to ask you a question about small caps. You also run Artisan International Small Cap. I'm wondering if you are seeing any differences from a market cap perspective between some of the larger caps and the smaller caps in Europe, especially. And do you think that there is more of a risk for maybe smaller-cap companies in Europe that might have more of their business in Europe versus maybe some of the larger-cap companies in Europe that have a lot of global and international operations and exposure outside the continent?

Yockey: That's a risk because smaller companies tend to be – it's a good point – they tend to be less geographically dispersed than big companies do. Most of the companies that we have that are based in Europe in the small-cap fund are companies that have exposure to things going on outside of Europe.

So one of the big holdings is Pepsi, I'm sure I'm going to get hit by a lightning bolt, not Pepsi, but Coca Cola of Turkey, and that's – they have exposure to a lot of the Middle East and Turkey, which are big markets for the consumption of Coca Cola. And so, we're quite positive on companies like that. We have a couple of companies that have big exposure to the champagne business, and that's a global business that's coming back quite strongly now.

So, the fact that Europe isn't a high growth place, we've kind of been dealing with that for a long time. But if you find companies that are well managed that have recognized that, you can actually find some real attractive situations.

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