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$45.9m |
| Domicile | USA |
| Structure | LLC |
| Base currency | USD |
| Dealing | Monthly |
| Min. investment | US$3,000,000 |
| Management fees | 0.90% per annum |
| TER | 1.12% 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
Reach, the UK newspaper company which owns the Mirror and the Express, was the worst performing holding in the month (-10% in local currency terms) and the best performing in the quarter (+50%) during which old-fashioned – steel, mining, pubs, cars, banks, retail - has been the new fashion. The recent agreement between Facebook and News Corporation in Australia may be a harbinger of similar arrangements in which the ancient cry is heard again: “Content is king.” Companies with content have found it hard to conserve their revenues. Ultimately, however, content has to be valued, because otherwise there is no more content. It would be optimistic to suppose that subscribers will ante up for the exclusive specialised content of the Mirror and the Express, neither of which have quite the same cachet as, say, The Economist; but Reach has been making strong progress with its online activities and meanwhile its valuation has improved from rock bottom levels.
The second worst performer in the month was Nomura, which announced that it had made a possible loss of $2 billion from transactions, still to be unwound, with a US client, reported to be a hedge fund, Archegos. Before this loss we had expected Nomura’s net income this year to be around $2.6 billion thanks to significant improvements in retail operations and the wholesale bank. Nomura’s share price is currently trading 0.6 times book value. Nomura’s tier one capital ratio should remain at over 17%. These losses raise serious concerns about risk controls. Assuming the inevitable tightening of risk controls does not impinge too heavily on underlying profit, the share price correction leaves the current valuation looking attractive.
Among the worst performers during the quarter were the two gold mining companies, Barrick and Newcrest, down respectively 14% and 4%, whose precautionary place in the portfolio we have discussed in recent reports. Barrick is trading at only six times earnings before interest, tax and depreciation, just about its lowest level for many years. It has 68 million ounces of reserves and 160 million ounces of resources (the former based on a price per ounce of $1200, the latter at $1500). An extra $250 on the current gold price would produce an extra $1.25 billion or so of pre-tax profit. The current market capitalisation is $35 billion. There is no net debt. Apart from its dependence on the gold price, the chief risk that we see is that the chief executive, Mark Bristow, may embark on acquisition. His record of acquisitions at Randgold was good but given all the progress the company has made in getting down its debt this would concern us.
During the month the president of Tanzania, John Magafuli, died. Having struggled successfully to repair the disastrously bad relations that Barrick had with the president, Mark Bristow made a eulogic statement in which he described Magafuli as a visionary. In the lobby of Barrick’s headquarters in Toronto is or was a bust of Barrick’s founder, Peter Munk, with the label “Founder, Builder, Visionary”. The echo was probably unintentional.
Commentary
BT was among the top performers during the month, up 25% in the month in local currency terms. Regulatory uncertainty has cast a shadow, especially given BT’s commitment, in Openreach, of large amounts of capital to providing Fibre To The Home (FTTH). In the month, the UK regulator laid out a framework that will allow BT to earn attractive returns on this investment. BT can now push ahead with its plans to invest roughly £12 billion of capital and roll out FTTH to over 20 million homes by the middle of the decade. Valued as other utilities are with a regulatory asset base approach, Openreach today has a value of about £12.7bn. This is almost the entire current market value for the whole of the BT group - which acquired the rival mobile network operator EE for £12.5 billion in 2015. The shares currently trade on a forward price to earnings ratio of just nine times, a very large discount to its European peers’ valuations.
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Commentary
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Commentary