Monday, September 2, 2013

Does My Money Need A Passport? (1)


Once upon a time Corporate America was top dog and paid little attention to the industries of other countries and their products.  Then change started to happen in the US.  People began driving Volkswagens and Toyotas instead of Chevys and Oldsmobiles.  Some bikers bought Honda motorcycles instead of HarleysSony televisions became market leaders, pushing aside Zenith and Magnavox.  Pasta actually came from Italy.  You could find excellent wines from South America at your local liquor store at a reasonable price.  Chocolate lovers traded their Baby Ruth bars for Nestle Crunch.  Interestingly, Baby Ruth bars are now made by Nestle.  Globalization hit with a vengeance and continues to this day.

One of the earliest pioneers in international investing was Sir John Templeton.  Born in Tennessee, Templeton ultimately moved to Nassau where he became a naturalized British citizen.  He was knighted for his work in several fields, including philanthropy.  He formed the Templeton World Fund in 1978, one of the first mutual funds to invest on a global basis.  Templeton had a value/contrarian investment strategy.  Unlike most of his contemporaries, however, he would look for low priced companies beyond America's shores.  He is considered one of the top international investors in the history of Wall Street.

Peter Lynch managed the Fidelity Magellan Fund  for thirteen years with an astounding average return of 29% per annum.  A little known fact is that a portion of that return was attributable to his foreign investments.  In his book, Beating the Street, he revealed what he called his "adventures abroad" as follows:

With the exception of John Templeton, I was the first domestic fund manager to invest heavily in foreign stocks.  Templeton's fund was a global version of Magellan.  Whereas I might have 10 - 20 percent of the money invested in foreign stocks, Templeton invested most of his money abroad.

With the pile of cash I now had to invest, I was almost forced to turn to foreign stocks, particularly in Europe.  With a big fund, I needed to find big companies that would make big moves, and Europe has a higher percentage of big companies than we do. 

So, what does this mean for the individual investor?  Investment possibilities are now global.  Many Wall Street professionals advise their clients to diversify a portion of their portfolios with the stocks of foreign companies. 

We will explore the world of global investing further in the next post. 

Excerpts from Beating the Market by Peter Lynch with John Rothchild, copyright 1993, published by Simon & Schuster, pages 122-123

Comments are always welcome.

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