Tweedy, Browne: Selling Korea Electric, Pfizer; Buying a Japanese Smallcap

Includes: ABN, BCS, KEP, MBI, PFE
by: Tweedy, Browne

From Tweedy, Browne's 3rd Quarter 2007 letter to shareholders:

Returns for the quarter were largely attributable to solid returns in our Dutch and Swiss holdings, particularly in a number of our consumer staple, financial and industrial stocks. Stocks such as Nestle, ABN Amro (ABN), Heineken (HINKY.PK) and Kone had strong returns despite the tumult during the quarter. Our small weighting in Japan was also a plus as Japanese stocks were down once again for the quarter. In contrast, a number of our British holdings, and some of our consumer discretionary, pharmaceutical and materials holdings performed poorly during the quarter. This included stocks such as Cargotec Corp., Barclays (NYSE:BCS), and Akzo Nobel, among others.

We were once again significant net sellers of stocks during the quarter, eliminating a number of companies that reached our intrinsic value targets, and trimming numerous others. We sold our remaining shares in Toroshima Pump, Korea Electric Power (NYSE:KEP), Fraport, Sanyo Shinpan, Pfizer (NYSE:PFE), Stork and Wegener. All were sold at substantial gains over our original cost with the exception of Sanyo Shinpan and Pfizer, where the gains were more modest. We trimmed a number of others, the most notable being Jardine Cycle & Carriage, MBIA, Sika, Youngone and Taeyoung Engineering.

With stocks rebounding quickly and sharply from their August declines, we were unable to make much headway in terms of new stocks for the Fund during the quarter. We added only one new stock to the portfolio during the quarter: a smaller market capitalization Japanese company, trading at 11.5 times forward earnings, whose name we are withholding during the accumulation phase.