Doddington Global Ex US Fund LLC
A focussed EAFE equity strategy with a classic, contrarian value approach to building long-term value.
Investment objective
The Fund seeks to achieve over the long term a total return in excess of that of the MSCI EAFE Index (with net dividends reinvested) through investment in a concentrated portfolio of equity securities, primarily but not exclusively of large companies, selected from the major markets (except the United States) and to a lesser extent from some emerging markets, worldwide. The approach is classic contrarian value, based on bottom-up fundamental research of individual companies.
Fund particulars
| Launch date | 01 February 2017 |
| Fund size | US$32.6m |
| Domicile | USA |
| Structure | LLC |
| Base currency | USD |
| Dealing | Monthly |
| Min. investment | US$3,000,000 |
| Management fees | 0.90% per annum |
| TER | 1.20% per annum |
| Benchmark | MSCI EAFE |
Andrew Goodwin
Nigel Waller
Andrew Goodwin
Andrew joined OP in March 2013. He had previously been employed by SVG Capital in London for seven years managing mainly European equity portfolios. Before joining SVG, he held portfolio management positions at Sovereign Asset Management, American Express Asset Management and Phillips & Drew Fund Management. He graduated from Cambridge University. He co-manages the global and EAFE equity portfolios and contributes to the overall investment selection.
Latest publications
Latest publications
Nigel Waller
Nigel is one of the founding partners of OP. He was previously at MLIM for 13 years. He was a director and portfolio manager on the global team. At MLIM he was also a member of the emerging markets and European teams in London and, from 1997 to 1999, the Asia team in Singapore. He graduated from City University. He is Chief Investment Officer and Chief Executive. He co-manages the global and EAFE equity portfolios and contributes to the overall investment selection.
Latest publications
Latest publications
EAFE Equities Strategy
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Commentary
The resignation of Mr Abe as prime minister of Japan does not seem likely to bring an end to Abenomic progress, sporadic though that has been. In particular, the corporate scene in Japan has gradually been changed, to a large extent because of his influence both directly in measures which have been taken – the stewardship code, for example – and indirectly because more active investors have been encouraged by his policy and rhetoric. The level of share buybacks has continued to increase, and they are financed from cash flow and cash in the balance sheet rather than, as in the US in the last wave of buybacks before Covid, through borrowings. There has been increased attention in Japan to return on assets and return on equity, of which Hitachi, disposing of many subsidiaries, buying in the minorities of others, has been a glowing exemplar.
Now that Warren Buffett is a nonagenarian not every action at Berkshire Hathaway can be attributed directly to him, but it is interesting that a fundamental investor such as Berkshire Hathaway, with a firm focus on valuations, should have bought shares in the five leading Japanese trading companies. This follows, a year ago, the raising of ¥625 billion in bonds by Berkshire Hathaway, at an average coupon of 0.67%. We are enthused, as for a long time, by the values available in Japan. One of the best performers in the month, up 16%, was Toyota Industries. This company’s market capitalisation is Y2 trillion while the value of its interest in Toyota Motor alone is ¥1.7 trillion. In addition, Toyota Industries is a leader in forklift trucks and factory automation, and its warehouse automation sales have recently increased by 10% year-on-year as a result of growth in e-commerce.
Another company in which Berkshire Hathaway has recently bought shares is Barrick Gold, the portfolio’s largest holding despite several cuts amounting to about 5% in order to keep the holding at less than 10% of the portfolio. In the month, Barrick and Newcrest were poor performers, respectively +0.1% and -8.2% in local currency terms. The portfolio’s combined holding in these two gold mining shares is 15%. We continue to believe in the merits of gold because of the dangers of dislocation as a result of unprecedented central bank and government action.
We have written from time to time about two stock market indicators, the only two of which we have been long-term devotees. The first is the Coppock Indicator, devised by an Episcopalian minister in Texas who observed how long it took for people to recover from trauma – bereavement and divorce especially – and applied these principles to the stock market. The Coppock Indicator is very long-term: it says nothing about the next year or two. We reviewed the past usefulness of Coppock in the US, Japan and gold markets. Unfailingly a Coppock buy indicator resulted in an excellent five and 10 year return.
Commentary
We were, therefore, very interested to note, both at the time and in the depths of the Covid spring when for a while a strong 5 year return looked unlikely, that for a whole range of markets there was a Coppock buy indicator in September 2019. It gives us comfort still now that we should not become too worried about markets, and maintain our mantra which is to have faith in equities. The second indicator is extremely short-term: the Investors Intelligence Survey of Advisory Sentiment in the US. When this survey of newsletters (which have an inclination to be bullish) shows extremes, it tends to be very revealing as an inverse indicator. The most recent reading has been 62% bullish, 16% bearish, and this is indeed an extreme which suggest caution about the US market.
What we find difficult, and what has utterly confounded us in recent years, has been that, however expensive or extended the US market (or some shares in it) may be, this is not true at all of the very wide range of shares which fall into the traditional value category. The average price-earnings ratio in our non-US portfolios is under 10 and the average price to book value ratio is 0.5. Covid and lockdown have thrown price-earnings ratios into disarray in the short term, but we feel that it is not too adventurous to suppose that there will be a post-lockdown world, and that companies (such as easyJet and East Japan Railway) which are temporarily afflicted by lockdown will recover to reasonable profitability which more than justifies their current valuations.
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Commentary
Commentary
Commentary