A Wall Street Transcript Interview with Wally Obermeyer, President and Founder of Obermeyer Asset Management: Value-Based Investment Approach with a Global Perspective

Wall Street Transcript

67 WALL STREET, New York - May 15, 2013 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review for serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with highly experienced Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Financial Services - Long-Term Investing - Large Cap Investing - Value Investing - High Quality Companies - Bottom-up Investing - All-Cap Growth Investing - Investing in Emerging Markets

Companies include: Potash Corp. of Saskatchewan, (POT), Mastercard Incorporated (MA), Google Inc. (GOOG) and many others.

In the following excerpt from the Investing Strategies Report, Wally Obermeyer, an experienced portfolio manager, discusses his asset allocation philosophy for investors:

TWST: Broadly speaking, can you give us a sense of how you're positioning, adjusting and fine-tuning portfolios in the current investment environment?

Mr. Obermeyer: First, I'd say it's a bit of a tricky environment, because as we see it, private debt and leverage have been largely reduced since 2008 and 2009, but at the expense of rising public debt, particularly with the stimulus packages and with the Federal Reserve's actions. None of us knows what the consequence of that higher public debt and accommodative monetary policy will be. There are certainly a number of people who sound alarms about these issues, who are smart and bright and experienced and so forth. Yet on the other side, the cost of not adopting these policies over the past few years could have been even greater.

So as we look at the situation and try to be good stewards of our client's capital, we want to balance the potential risks of this large public debt igniting a highly inflationary environment at some juncture. The problem is, we don't know if this high debt will actually be inflationary. We expect that it will be, but we don't know for certain; if it does lead to inflation, we don't know if we'll see it in six months or one month or seven years. Ultimately, we want to position portfolios so that our clients are in a solid position over a broad range of potential outcomes.

That being said, we like to hold a certain number of assets that we think will perform relatively well in an inflationary environment, if and when that comes. On the fixed income side, we are keeping the duration relatively short. We hold a certain number of foreign bonds from countries whose currencies we would expect to rise relative to the U.S. dollar, countries with current account surpluses as opposed to deficits. Norway would be an example, as would Canada and Australia. We think that those currencies will rise relative to the U.S. over a five- or 10-year period. In terms of equity selections or sectors, in this environment, we want to be diversified, but we believe that the emerging market growth over the next 10 years is likely to be pretty robust.

An example of a position that would, in our view, play into that pretty well would be Potash Corp. (POT), up in Canada. The global demand for food is growing, particularly given rising incomes in China, India and other developing economies. These civilizations will likely need fertilizer to feed their growing populations; this product will likely have pricing power given increased demand. Another example would be MasterCard (MA). It is a strong U.S. company that's well-positioned for global growth, given the tendency of so many consumers to put everything from a $3 charge at the grocery store to regular purchases, such as parking, and major purchases on their card. We think demand for electronic payments is likely to increase.

Another sector we like are large-cap companies with significant sales and revenue derived from overseas. For example, the last I looked, 52% of Google's (GOOG) revenue was non-U.S.-derived. We like that a number of the global companies are well-diversified that way. That being said, there are some great small-cap companies that have been ignored, and we also see good value there.

TWST: And tell us about how you define and assess risk and how you incorporate risk management within your portfolios...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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