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Matthew Sauer, Esq.
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Matthew Sauer, Esq. is the President and Chief Investment Officer of the Mutual Fund Investor Guide. Each month he publishes the Investor Guide to Fidelity Funds, Investor Guide to Vanguard Funds and ETF Investor Guide. On a weekly basis he publishes the Global Momentum Guide, focusing on sector... More
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  • Fund Spotlight: Third Avenue International Value (TAVIX) 0 comments
    May 23, 2013 8:49 AM

    International investing hasn't been a good bet in 2013 due to a strong U.S. dollar. Outside of Japan, many markets have trailed the U.S. when adjusted for currency changes. Investors looking to find value in international shares can consider Third Avenue International Value (MUTF:TAVIX).

    This fund holds a small number of stocks, currently 36, which makes the fund diversified, but not excessively. Stock selection plays a role in returns with 41.5 percent of assets in the top ten (all portfolio data as of April 30). Investors who are happy with the track record of beating the MSCI EAFE by an annualized 2 percent over the past ten years can rest comfortably knowing the same manager, Amit Wadhwaney, is still making picks.

    Currently, the largest holdings in the fund fall under the diversified operations and diversified holding companies classification, which combine for about 22 percent of assets. This includes firms such as Leucadia (NYSE:LUK). The next largest sector exposure is real estate at 12 percent; and insurance with 9 percent of assets. Diversified firms have historically been undervalued because it is harder to value all the parts, and their presence in the portfolio helps dampen volatility.

    For country exposure, Japan is the largest at 12 percent of assets, followed by Germany, the U.S. and Singapore with 8 percent each, then France at 5 percent. The fund is mainly holding developed markets, with Poland making it into the top 10 countries by exposure with 3.8 percent of assets. There's a lot of euro and yen exposure here and both have been weak of late. Investors expecting a stronger U.S. dollar moving forward may still like this fund for international exposure, but it will lag domestic U.S. funds if the dollar rally strengthens.

    As of April 30, the fund had a large "cash and other" position at 16 percent of assets. The fund held a few currency options, but the position was mostly cash as of the last report.

    The portfolio falls in the upper left corner of Morningstar's grid, placing it on the edge between large cap and mid cap, core and core value.

    At the end of the day, investors are paying 1.40 percent for the stock picking ability of the managers. With a relatively low number of holdings, the managers aren't stealth indexing. They are making value picks they expect to beat their benchmark, and the long-term track record shows they have done it before. Whether investors think they can keep on doing it will determine whether this fund finds a place in their portfolio, but it's worth consideration for investors who want a value manager making their picks.

    TAVIX earned a 3-star rating from Morningstar as well as a Bronze ranking.

    TAVIX has a Buy rating in the Fidelity Independent Adviser Newsletter and a Power Index Rating of 84. If you would like more information about the proprietary rating system we employ in our newsletter, please call us at (800) 548-3797 and we would be happy to speak with you.

    Historical Performance (as of 5/15/13)

     YTD1 year3 years*5 years*
    TAVIX12.2133.9412.071.07
    +/- MSCI EAFE-0.611.31-0.872.07
    +/- Category (NASDAQ:SP)1.393.85-0.26-0.34

    *3 and 5 Year Returns are annualized. Past performance is no assurance of future results.

    Top Ten Holdings (as of 4/30/13)

    Top 10 holdings account for 41.5% of assets.

    Straits Trading Co., Ltd.
    Daiwa Securities Group, Inc.
    Weyerhaeuser Co.
    Taylor Wimpey PLC
    Netia S.A.
    Sanofi
    Leucadia National Corp.
    Munich Re
    White Mountains Insurance Group Ltd.
    Mitsui Fudosan Co., Ltd.

    Operations and Expenses

    TAVIX has an annual holdings turnover of 20%. It has a no load, a short-term trading fee of 2% for shares held less than 60 days and an expense ratio of 1.40%. The minimum initial investment for individuals is $100,000.

    Management

    TAVIX has been managed by Matthew Fine since January 2012 and Amit Wadhwaney since December 2001. Matthew received his BA from Hamilton College; Amit earned an MBA from the University of Chicago.

    Fidelity Independent Adviser's Power Rankings

    Power Index: 84

    Power Trend: Positive

    Recommendation: Buy

    Sources: www.thirdavenuefunds.com

    http://quotes.morningstar.com/fund/tavix/f?t=tavix

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: No representation is made that any account will or is likely to achieve profits or losses similar to those shown, and there are frequently significant differences between hypothetical performance results subsequently achieved by following a particular strategy. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. All investments involve risk including loss of principal. Please read all disclosures before investing.

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