32
BARRON’S
February 22, 2021
The portfolio falls into two buckets, Gau-
trey explains: core stocks and opportunisticstocks. Core stocks, which usually make up60% to 70% of the portfolio’s assets, “arehigh-return-on-invested-capital businesseswith structural competitive advantages andgood management teams.”
The so-called opportunistic names—a
company experiencing a turnaround, say—make up the rest of the portfolio. “These areshorter-term holdings, where, again, we seean earnings-growth gap, a difference versusconsensus [analyst expectations],” he says.It isn’t that the managers disregard the shortterm in picking their core stocks, but “thecompounding effect of those high-qualitybusinesses is what the market often under-estimates in the long term.”
One core stock is Latin American e-com-
merce giant
MercadoLibre.............................
(MELI), which
the fund purchased toward the end of 2019,though Gautrey had been investigating it forover a decade. His reservation: “Politics andmacroeconomics in Latin America can bepretty volatile.” But Mercado’s managementteam impressed him over time. “They man-aged through everything—amazing cur-rency
devalua
tions, overturning of govern-
ments, [government] debt defaults.”
Mercado has distinct advantages over
comparable e-commerce players. First, e-commerce penetration in Latin Americais a fraction of that in the U.S., roughly 3%,Gautrey says. Mercado also has built outits warehouse, trucking, and deliveryinfrastructure—much like
Amazon.com
(AMZN), but with one key distinction.
“Particularly when you go into emergingmarkets, relying on the nationalized postalinfrastructure can mean that a deliverytakes several days to arrive,” Gautrey says.“Building out your own logistics infra-structure can dramatically improve theconsumer experience. And then having thatinfrastructure also acts as a barrier to entryfor [competitors].” The stock is up 178% inthe past year, yet Gautrey thinks the marketcontinues to underestimate its potential.
Among the fund’s opportunistic plays is
Equinor...................................
(EQNR), a Norwegian energy com-
pany, which has a negative 2.2% three-yearannualized return. The team began lookingat the stock last April, in the pandemiccrash, and bought the stock in May whenoil was about $40 a barrel. One argumentfor the stock was “that $60 oil was likely,as soon as we get economic normalizationagain,” Webber says. Oil is now at $59.
But the less-understood opportunity in
Equinor involves alternative energy. Equi-nor conducts oil exploration on the shallowNorwegian continental shelf. But “it’s alsovery well suited for offshore wind [farms],”Webber explains. “We found the develop-ment of [Equinor’s] expertise in offshorewind is really flying below the radarscreen.” Also, Norway is investing heavilyin alternative hydrogen fuel and carbon-capture programs, and Equinor has “lead-ing expertise” in both areas, Webber says.“That will position them to be one of the fewincumbents that are able to transition awayfrom being too reliant on fossil fuel busi-ness,” he says. But Equinor is only a tempo-rary play, as the fossil fuel industry as awhole is in “secular decline,” he adds.
Sometimes, core and opportunity stocks
can be in the same sector. Some of thebiggest opportunities the team has foundrecently have been in the financialsector—18% of the fund’s portfolio. Thefund has opportunistic plays in Europeanbanks, such as Italy’s
Intesa Sanpaolo............................
(ISP.Italy) and Sweden’s
Svenska Handels-
banken
(SHBA.Sweden), purchased during
the stock market’s 2020 slide. “These aremore shorter-term holdings, where I thinkloan losses are overestimated,” Gautreysays.
In contrast, the fund has held core Asian
financial plays—India’s
HDFC Bank
(HDB)
and Hong Kong insurer
AIA Group
(1299.Hong Kong)—for years. Growth ratesin financial services are better in Asia,where a burgeoning middle class is increas-ingly embracing banking and insurance.
AIA “is probably the world’s best-run
life insurer,” and HDFC Bank is “one of thebest-run banks,” Gautrey says. Those arethe kind of companies where the surpriseisn’t that they are currently doing well, butjust how well they will do over time.
BHartford SchrodersInternational Stock
Total Return1-Yr5-Yr 10-YrSCIEX32.0% 16.1%7.6%Foreign Large14.011.25.5Blend CategoryTop 10 HoldingsCompany / TickerWeightingTaiwan SemiconductorManufacturing / 2330.Taiwan4.2%Samsung Electronics /4.0005930.KoreaAlibaba Group Holding / BABA3.3Tencent Holdings / 700.Hong Kong3.2ASML Holding / ASML2.9Nestlé / NESN.Switzerland2.8AIA Group / 1299.Hong Kong2.5Roche Holding / ROG.Switzerland2.5Vestas Wind Systems /VWS.Denmark2.4Schneider Electric / SU.France2.3Total30.1%Note: Holdings as of Dec. 31. Returns through Feb. 12; five- and 10-yearreturns are annualized.Sources: Morningstar; Hartford FundsScoreboard:
Settling Down
(
Thisiswhattreadingwaterlookslike.U.S.stockfundsandtheS&P500wereveryslightlydown,aswere
bonds. Andcommoditiescontinuedtorally,by1.99%. Meanwhile,preciousmetalstumbled5.32%.
OneWeek
Year-to-Date
U.S.STOCKFUNDS- 0.70%
7.24%TOPSECTOR/CommoditiesGeneralFunds1.999.30BOTTOMSECTOR/PreciousMetalsEquityFunds- 5.32
- 9.08
S&P500- 0.06
4.20U.S.BONDFUNDS- 0.29
- 0.05
BloombergBarclaysAGGBond- 0.54
- 1.44
THEWEEK'STOP25Fund
InvestmentObjective
OneWeek
Year-to-Date
VictoryGlNatResY/RSNYXGLNaturalResourc5.42%28.3%KineticsInternetNL/WWWFXScience&Tech4.9533.2WCMAltCrdtEventInst/WCFIXAltEventDriven4.4813.3BlackRockEnrgyOppA/BACAXGLNaturalResourc3.7812.8InvenomicInstl/BIVIXAltLong/ShortEq3.754.8KineticsMktOppsNL/KMKNXFlexiblePortfolio3.5228.3InvescoEnergyA/IENAXNaturalResources3.3714.9G&RResourcesInst/GRHIXGLNaturalResourc3.2721.4KineticsGlobalNL/WWWEXGLSm/Mid-Cap3.2323.1UprightGrowth&Income/UPDDXEquityIncome3.1441.1FidelityAdvEnergyI/FANIXNaturalResources3.0618.6FidelitySelEnergy/FSENXNaturalResources3.0318.4GothamHedgedPlusInst/GHPLXAltLong/ShortEq2.98- 2.4
PIMCOComm+StratInst/PCLIXCommoditiesGeneral2.9015.0DoubleLineStratCommI/DBCMXCommoditiesGeneral2.8512.4FidelityGlobalComStk/FFGCXGLNaturalResourc2.8411.3KineticsParadigmNL/WWNPXSmall-CapGrowth2.8429.5HennessyBPEnergyInst/HNRIXNaturalResources2.7623.2GlobalTacticalInst/GIVYXGlobalMulti-CapCore2.678.5RydexBankingInv/RYKIXFinancialServices2.5814.1FranklinStrNtReA/FRNRXGLNaturalResourc2.5513.4NeubergerAltCmStInst/NRBIXCommoditiesGeneral2.5010.8SaratogaEnergy&BMI/SEPIXNaturalResources2.499.1BlackRockNtrlResA/MDGRXGLNaturalResourc2.429.3SlvrPprCmdStrGlMacI/SPCIXCommoditiesGeneral2.415.8THEWEEK'SBOTTOM10Fund
InvestmentObjective
OneWeek
Year-to-Date
MidasFund/MIDSXPreciousMetalsEq- 8.90%
- 14.7%
UprightGrowthFund/UPUPXGlobalMulti-CapValue- 8.33
49.1GlobalCleanEquityI/CGCNXIndustrials- 7.52
6.6VanEckIntlGoldY/INIYXPreciousMetalsEq- 7.15
- 13.1
OCMGoldAdv/OCMAXPreciousMetalsEq- 6.65
- 7.2
WellsFargoPrecMetA/EKWAXPreciousMetalsEq- 6.58
- 11.1
GabelliGoldI/GLDIXPreciousMetalsEq- 6.53
- 11.3
InvscGld&SMA/OPGSXPreciousMetalsEq- 6.18
- 10.1
USGlblGold&PM/USERXPreciousMetalsEq- 6.06
- 10.6
FidelitySelGold/FSAGXPreciousMetalsEq- 5.97
- 10.3
THELARGEST25Assets
3-Year* 1-Week
YTD
Fund
(billions) InvestmentObjective Return Return Return
AmericanFundsGroA/AGTHX$125.2 Large-CapGrowth19.7% – 0.70%5.6%FidelityContrafund/FCNTX
110.3 Large-CapGrowth18.3- 0.53
4.9VanguardWellingtonAdm/VWENX94.6 MixTgtAllGro10.3- 0.04
2.3AmericanFundsEuPcR6/RERGX89.6 IntlLarge-CapGrowth11.7- 0.07
6.1AmericanFundsBa
lA/ABALX
87.7 MixTgtAllGro9.4- 0.13
2.4AmericanFundsIn
cA/AMECX
74.9 MixTgtAllMod7.00.583.7PIMCOIncomeInst/PIMIX
73.1 Multi-SectorInc5.3- 0.33
0.7Dodge&CoxStock/DODGX
70.2 Multi-CapValue9.51.068.4Dodge&CoxIncome/DODIX
69.4 CoreBond6.3- 0.48
- 0.8
AmericanFundsIC
AA/AIVSX
67.2 Large-CapCore10.60.284.4BlackRockCashInstSLA/
64.4 InstlMoneyMktNANANAVanguardPRIMECAPAdm/VPMAX63.7 Large-CapCore15.6- 0.11
8.9AmericanFundsWashA/AWSHX63.0 Large-CapCore10.30.404.2AmericanFundsCI
BA/CAIBX
61.9 GlobalEquityIncome5.30.543.0VanguardIntlGroAdm/VWILX
60.5 IntlLarge-CapGrowth24.1- 1.33
10.5AmericanFundsFIn
vA/ANCFX
59.5 Large-CapCore11.80.085.0AmericanFundsNPerA/ANWPX
58.9 GlobalLarge-CapGrowth 18.1- 0.23
5.7AmericanFundsCWG
IA/CWGIX
56.9 GlobalLarge-CapCore9.70.115.1TRowePriceBCGro/TRBCX
56.0 Large-CapGrowth20.4- 0.40
5.6PIMCOTotRtnInst/PTTRX
53.7 CorePlusBond5.8- 0.62
- 1.1
MetWestTotalRt
nI/MWTIX
53.5 CorePlusBond6.3- 0.61
- 1.2
FidelityStrAdvLgCp/FALCX
51.5 Large-CapCore005.4VanguardSh-TmInvAdm/VFSUX51.3 ShortInvGrade4.2- 0.05
0.1VanguardWellesleyAdm/VWIAX50.1 MixTgtAllocCon8.0- 0.04
0.3VanguardTgtRet2025Inv/VTTVX49.9 Mixed-AssetTarget20259.4- 0.45
2.7*Annualized02/15/2018to02/18/2021.ThroughThursday.Source:Lipper