BI > MAY 2004

Follow a Leader

Discovering International Stocks With Artisan International

I don't know about you, but when I'm thinking about tiptoeing across a minefield, I think it's a good idea to follow somebody who seems to know where to take the next step. International investing carries unique challenges and risks. Mark Yockey has masterfully guided the Artisan International Fund in the realm of international investing. If I were going to implement some of the individual international stock selection ideas covered in Associate Editor Kevin Lamiman's story, I'd lean on Mark Yockey for some ideas. What's capturing his attention these days?

Investment Approach

Some mutual funds can be a powerful source of ideas for stocks to study. It simply makes sense for those on the hunt to search for managers and funds with an outlook similar to that of NAIC investors.

Artisan International focuses on well-managed growth companies and is one such example. (No investment recommendation is intended for this fund or the stocks mentioned in this article; readers should always do their own studies.) The fund manager lists the following attractive growth themes that will capture the fund's attention: sustainable (10 to 30 percent) annual growth rates, reasonable valuations, strong industry presence relative to peers or competitors and effective management with focus on shareholder value.

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So far, so good. This sounds like a good fit with NAIC investing. Looking a little deeper, we note that portfolio turnover is less than 40 percent. This suggests that ideas are "locked in." Artisan International does not add large numbers of new companies with each passing quarter. In the chart above, we see that there are three new companies in the top 25 holdings.

Mining for Opportunity

The new companies are UBS AG, Henkel Kgaa and Kingfisher. If my personal portfolio or investment club needed a financial-sector stock to maintain balance, I'd probably take a closer look at UBS. When you start digging in to many of these international companies, you'll find that many of them have ADRs (American Depositary Receipts) and for many of them, some historical data will be available from NAIC's online SSG data.

In this case, we find that UBS does have an ADR and the ticker symbol is UBS. According to the company description, UBS operates one of the largest banking and financial services companies in the world through its headquarters in Zurich, Switzerland. As the world's largest private bank, it's a leading provider of private banking services and one of the largest asset managers globally.

The company was also one of the stars of the recent best seller The Da Vinci Code. This piques my interest, and I'd like to explore a little more. The plot of this novel revolves around a scavenger hunt of sorts. You'll find that researching almost any international company will lead you through elements of a scavenger hunt as you acquire the information we all need for our stock studies.

The second company new to Artisan International is Henkel Kgaa, a German firm that's similar to Colgate-Palmolive and Procter & Gamble. In fact, Henkel recently acquired Dial Corporation.

The third new listing is Kingfisher. This British company -- at first glance -- is the European version of our Home Depot or Lowe's. In fact, any study of future global opportunity for Home Depot and Lowe's should include an assessment of what Kingfisher is doing.

Kingfisher is Europe's leading home improvement retailer, with leading market positions in the U.K., France, Poland, Italy, China and Taiwan. You can find more information on the company at www.kingfisher.co.uk.

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Artisan International Track Record: During a nearly 10-year period when the average return from international funds (Lipper) has been 6.0 percent, this fund has achieved an annualized total return of 13.4 (as of Feb. 29, 2004, and since inception).

Courage and Conviction

In a Morningstar analyst report by William Samuel Rocco (Jan. 29, 2004), the performance of Yockey and Artisan International was hailed with the following opening statement: "Here's a reminder of the reward for having the courage to stick to one's convictions." The reference was to a recent swoon in the price of one of Artisan's top holdings, Allianz. The stock price had decreased considerably, and questions were raised about continuing to hold. Yockey responded that Artisan had done its homework diligently and that the fundamentals seemed to be intact. In the fund's view, Allianz was poised to deliver effective returns over the long term.

For the same reasons, commitment and track record, NAIC investors will probably find the fund to be a reliable source of stocks to study going forward. The performance of Artisan International clearly demonstrates that there are solid opportunities in international investing -- and following a leader through the minefield seems like a pretty good idea to me.

Mark Robertson is director of online resources and senior contributing editor for BetterInvesting. He serves as a member of BetterInvesting Magazine's Editorial Advisory & Securities Review Committee. Mark can be reached at Robertson_Mark@comcast.net.