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By Greg Carlson | 11-15-2012 02:00 PM

Ideas for Global Growth

Emerging markets will drive global economic expansion during the next 20 years, and the consumer sector will have significant advantages in these areas, says Artisan fund manager Mark Yockey.

Greg Carlson: Hi, my name is Greg Carlson. I am a fund analyst with Morningstar. I am joined today on the phone by Mark Yockey. He is the manager of Artisan International and Artisan International Small Cap, as well as the comanager of Artisan Global Equity.

Mark, thanks for joining me today.

Mark Yockey: Hi, Greg. Nice to be with you.

Carlson: Mark, I want to talk primarily about the international fund, since that's the largest fund. It's been around for 17 years now just about. I just want to hit on a couple of points about the fund that maybe folks can understand better. First, I would describe this as a growth fund at heart but it does land in Morningstar's foreign large-blend category. And that's because it's not simply made up of rapid growth stories, late-1990s-style investments. Can you talk a little bit about the mix of the portfolio?

Yockey: Sure. We look for traditional growth stocks, but also we look for companies that have undergone restructuring, where we expect the growth is going to accelerate in the future and where maybe the company hasn't been a growth company in the past. And we look at growth in different ways. Sometimes growth can come from an acquisition strategy or can come from organic growth, but we're quite flexible in how we look at growth, and that's probably why we show up in the blend category rather than growth.

Carlson: You do currently have a sizable stake in the international fund in China and Hong Kong; 19% of assets combined as compared with 5% for the category. Can you talk a little bit about the types of companies you hold that are domiciled in those countries? It's a fairly diverse mix I would say.

Yockey: Sure, I'm happy to. We've found some great stocks to invest in China and Hong Kong. There are 1.3 billion people in China and Hong Kong; 1.29 billion in China and about 6 million in Hong Kong, but they are very much tied at the hip. There is some, what we call, category killers that we've been able to invest in. One is Baidu, and that's the equivalent of the Google of China, where they're growing at around 30%-40%. The most recent quarter was at 50%, but we expect the growth to slow down to about 30%. The stock's been under a little pressure recently, but we think it's way undervalued and it's going to do really well.

We've invested significantly over the last several years in the casino stocks. The only place where you can legally gamble in China is in Macau, which formally was a Portuguese colony and reverted back to China several years ago. And the gaming stocks have been wonderful investments over the last three or four years. And basically, our investments in companies like Sands and Wynn, have doubled and tripled.

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