Top Managers to Debate Foreign Hot Spots

If you're interested in foreign-stock funds or overseas investing in general, you should note that the 2010 Morningstar Investment Conference, which opens Wednesday, includes two breakout sessions with top international managers. Daniel O'Keefe of Artisan Partners, Philippe Brugere-Trelat of Mutual Series, and Rob Gensler of T. Rowe Price will be discussing stock-picking across the globe and this year's challenging environment in a breakout session Thursday morning. And Mark Yockey of Artisan Funds, Brent Lynn of Janus, and Wendy Trevisani of Thornburg Funds will be providing insights on different ways to approach foreign stocks as well as the current investment conditions overseas in another breakout session Thursday afternoon. (For more information on these breakout sessions as well as the overall conference agenda please click here.)

Great Global Minds Think Alike
Even managers who employ similar strategies often differ on the attractiveness of specific markets, sectors, and stocks, and the three skippers on the global panel use a diverse mix of styles. Although both O'Keefe and Brugere-Trelat follow all-cap value disciplines, the former typically doesn't invest in highly leveraged or distressed companies, buy bonds, or hedge currency exposure, while the latter regularly does all three. Gensler, on the other hand, relies on a pretty bold growth style that focuses on firms with sustainable competitive edges. Thus, there's considerable reason to expect lots of interesting back and forth among the three managers on the current investing climate around the world.

Indeed, the impact of the debt-related problems in Greece and other European countries, the weakness of the euro, and related issues are sure to be a prominent point of discussion at this breakout session, and there's ample evidence to suggest that the managers don't agree on the opportunity set in Europe these days.  Mutual Global Discovery  (TEDIX) had roughly 60% of its assets invested in Europe at last count, while  Artisan Global Value (ARTGX) had approximately 39% of its portfolio invested there, and  T. Rowe Price Global Stock (PRGSX) had only about 23% of assets in the region.

The global panelists don't see eye to eye on emerging markets, either. Gensler's fund had around twice the world-stock norm of 9% in emerging-markets names as of its most recently publicly available portfolio. By contrast, Brugere-Trelat's global offering had no investments there other than a small stake in South Korea, and O'Keefe's world-stock fund had no direct exposure to emerging-markets stocks. (His foreign small/mid value offering has nothing other than a tiny position in South Korea).

When sectors come up for discussion, the financials space is likely to be at the forefront. It's the largest sector in the MSCI All Country World Index by far--and the most popular one among global funds--and it still includes a number of struggling and controversial stocks. All three of the managers' world-stock offerings have relatively hefty weightings in the sector, but they've made very different stock choices. At last count, T. Rowe Price Global Stock's top two financials holdings were  Bank of America  (BAC) and  Goldman Sachs (GS); Mutual Global Discovery had a significant position in the first name but no exposure to the second; and Artisan Global Value didn't own either issue. Meanwhile, Artisan Global Value's top two financials stocks-- American Express (AXP) and  Bank of New York Mellon (BK)--weren't owned by the other two funds.

Fine Foreign Thinkers Often Disagree
The three foreign stock skippers on our second international breakout session also take disparate approaches to investing abroad. Yockey employs a flexible growth strategy at  Artisan International (ARTIX) and  Artisan International Small Cap (ARTJX), whereas Lynn follows an aggressive growth style at  Janus Overseas (JAOSX). And Trevisani and her comanagers rely on an eclectic style that focuses on three different types of stocks at  Thornburg International Value (TGVAX).

The appeal of European stocks in light of the region's macroeconomic woes is sure to be a point of debate at this session, too. Per their most recent publicly available portfolios, Yockey's funds had roughly two thirds of their assets in Europe, and Trevisani's offering had a little more than half its assets there, but Lynn's fund had less than one fifth of its assets in the region (as it has for years). And the impact of the weakness in the euro and other currencies in the region is likely to arise, because the Artisan funds are unhedged, while Janus Overseas has hedged some of its exposure to the euro and Thornburg International Value has hedged a good portion of its exposure to the euro and some of it exposure to the British pound.

The emerging-markets discussion should have a much different tenor on the foreign panel than on the global one. With their funds holding between 14% and 25% of their assets in emerging-markets stocks at last count, the three foreign managers clearly agree there are a good number of companies with strong prospects there. But they vary significantly in where they've found the best opportunities. Janus Overseas had a double-digit stake in India, for example, while Artisan International had just 3% of assets there. And Artisan International Small Cap and Thornburg International Value had 0.2% and 0% of assets in India, respectively.

The overall attractiveness of the health-care area will likely to come up at this session as well. Lynn has found a few biomedical and drug stocks that meet his high-growth standards, such as  Celgene  and  Biovail , but he has had trouble finding other names in the sector, and his fund had less than half the foreign large growth norm of 11% in health-care issues at last count. Yockey has had more luck locating health-care names that meet his criteria, so both his foreign large-growth and his foreign small/mid-growth funds had roughly 10% weightings in that space as of their last publicly available portfolios. Trevisani--who looks for consistent earners and emerging franchises as well as basic value stocks--has found a diverse mix of fetching health-care names. Her fund had a 14% stake in the sector at last count.

Stay Tuned
Of course, if you're attending the conference this year, you will be able to hear the discussion on these and other questions directly (and you could even ask your own questions on these or other topics). But you needn't worry if you're not attending, for you won't be left in the dark. We'll be posting video interviews with O'Keefe, Gensler, Yockey, and Trevisani as well as articles and blogs on various breakout and other sessions on our website during the conference and the days that follow. Stay tuned to our home page or click here for more conference coverage.