Jason Stipp: I am Jason Stipp for Morningstar. As the European crisis continues to unfold, we've been checking in with some fund managers that have expertise and investments in the area to get their take on the situation. I'm pleased to be joined today by Mark Yockey. He is a Manager of Artisan International, Artisan International Small Cap, and the newly launched Artisan Global Equity Fund.
Thanks so much for calling in today, Mark.
Mark Yockey: Sure. It's my pleasure, Jason. Nice to talk to you.
Stipp: First question for you. In our January Analyst Report on your fund, Artisan International, you had mentioned that you had returned aggressively to European banks, and you mentioned some of the qualities of those banks that attracted you to them. I was wondering given the situation over the last few weeks, if your outlook for those banks has changed, and how you are thinking about those investments now?
Yockey: Well, the environment for banking globally has changed. They are under a lot of threat from a number of different pressures. One is the Greek near default, and the European bailout of the Greek financial system is one thing that's changed. And the other thing is the worry about sovereigns in general around the world.
And the third thing is the regulatory risks, and no one knows what the rules are going to be going forward. I guess, you'd have to add the fourth thing, and that's all the politicians in the world have decided that banks are bad guys and they want to somehow punish them. And so they are all risks that I think were there in the fall, but I think are in there more to the point now.
Stipp: Would you say that for your holdings, particularly in Europe, do you think that some of those threats may be less of an issue for those banks or they may be able to weather the storm better than other banks or how do you see, I guess, the picks that you've chosen in the European financial space versus perhaps the landscape for the banking industry in general there?
Yockey: Well, we think so. We've focused on the stronger banks. We don't have anything in any other countries that are considered most at-risk. We don't have anything in Greece, Spain, or Portugal. We don't have anything in the U.K. really. We have some exposure to a very – one of the most conservatively run banks in the world in Italy, and we have a couple of French banks, and we think they're in pretty good shape. So we've been very selective in how we've gone about it, and we think, we'd have some names that are going to do extremely well.
Globally, the economy of the world can't grow unless the banks are allowed to make money. If you don't allow the banks to make money, they can't make loans, and if they can't make loans, there is no credit, and if there is no credit there is no growth. So, ultimately, after this period of negativity passes, I think, people are going to have to come to the realization that banks serve an economic purpose that's vital to the global economy, and these companies have to be able to make money.
Otherwise, how are they going to reinvest and make loans because that's what the economy needs, especially in Europe and then the United States, we need banks to make loans, and how are they going to make loans if they don't make any money? So it's a bit of a circuitous route, and when we return to the people viewing these things and they are slightly positive, more positive way, the valuations are going to go up a lot we think because they have extremely strong franchises with the banks that we own.
Stipp: Speaking of Europe more broadly and since the sell-off, I'm wondering if – do you think that valuations there overall have become more attractive, if it's an area that investors may want to begin to start thinking about bargain-hunting? And I'm wondering about valuations on your European holdings and do you think that maybe it's a time that you would consider adding to some of them?
Yockey: I added some of my own money to the fund. So I guess on a personal level I certainly think they are more attractive. And on a professional level, some of the stocks have come down 15% to 20% in this correction, and we thought they are pretty cheap to start with. So right now, it's not a problem finding high quality names that generate a lot of cash that are extremely attractive. And we think, if you can look beyond, if you can take a longer term view, now is an extremely attractive time to look at international equities, not just in Europe, by the way, but equities around the world have come down.