Transcription of Finance News Network Interview with Altrinsic Global Fund Portfolio Specialist, Simon Blanchflower
Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from the Altrinsic Global Equity Fund is Portfolio Specialist, Simon Blanchflower. Simon, welcome back.
Simon Blanchflower: It’s great to be back.
Carolyn Herbert: For those unfamiliar with Altrinsic, how’s the Fund constructed and what’s the stock selection process?
Simon Blanchflower: It’s fairly straightforward, we search the world trying to find a handful of high conviction ideas. We’re benchmark unaware and address agnostics. We address right across developed and emerging markets. Our approach is intrinsic value focus and we’re trying to find ideas that trade at discounts that add intrinsic value.
Carolyn Herbert: How has this process enabled you to find value in the stocks that you select, and can you give us some examples of that?
Simon Blanchflower: We invest right across the value spectrum, we don’t compartmentalise value. So invest in companies that have higher levels of financial productivity year-on-year, and generating sustainable earnings characteristics. But we also invest in companies where profitability levels may be currently depressed. And we’re looking for a recovery or improvement in those levels.
So companies that are more, higher financial productivity, are companies like Tokio Marine Holdings, Inc. (TYO:8766) in Japan, has done very well over the last year, targeting higher ROEs (return on equity). Also companies like General Electric (NYSE:GE), Time Warner Inc. (NYSE:TWX), very high quality companies that are focused on ROE generation for shareholders.
Then the other end of the spectrum, more cyclical companies or those that are perhaps growing from a lower base, things like BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) in the healthcare sector. We also invest across the energy and materials sectors, which of course more cyclical. And even companies like Suzuki Motor Corp (TYO:7269) for example, which we’ve owned recently, which has also done very well in those more profit recovery, improving profitability scenarios.
Carolyn Herbert: Taking a look at the current market conditions at the moment. What’s your take on the market volatility and do you see this as a buying opportunity?
Simon Blanchflower: Last year we certainly concentrated the portfolio into a high conviction ideas, moving into this period of volatility. And we’ve actually outperformed the market so far this year. But it has enabled us to look at areas that we were interested in before, but perhaps were too expensive. So biotech for example, is an area where there’s been a big sell down, more so the market has sold down. So that’s a particular area we’ve been looking at recently and bought a couple of positions there.
Carolyn Herbert: Finally Simon, how’s the portfolio positioned to capitalise on these opportunities?
Simon Blanchflower: We bought them up stock pickers, as I mentioned earlier. But broadly speaking, we’re quite underweight the US, overweight Europe, overweight Japan. From the sector perspective, quite overweight financials and overweight healthcare as well, but underweight the more cyclical sectors; so quite underweight industrials, materials and energy for example.
The portfolio also has a good mix of higher quality companies, those companies that have got higher sustainable financial productivity, as I mentioned before. We’ve also a good range of businesses that have specific business drivers, quite idiosyncratic and good diversifiers within the portfolio, particularly in these volatile times. Also perhaps just to mention quickly on the innovation side, particularly Healthcare, with the developments we’ve seen recently in gene sequencing, and how that’s leading to innovation in producing new drugs.
Carolyn Herbert: Simon Blanchflower, thank you for the update.
Simon Blanchflower: Thanks for having me here today.