Sarah Ketterer, an investor who often ventures where others fear to tread, co-manages Causeway International Value, a mutual fund based in California.
Why invest overseas these days?
About half of the world's publicly traded companies are based outside the U.S. So the opportunities to find bargain-priced stocks expand by 100% when you invest globally. Investors have been right to invest in stocks that pay dividends, and in health care and consumer-oriented stocks, but they could overstay their welcome. We think that people can make money in cheaper segments of the market, including economically sensitive stocks such as energy and industrials.
Where are you investing now?
We're finding good value in the oil-and-gas, engineering and construction industries. We would have an all-energy portfolio if we could, but clients depend on us for diversification. We aren't keen to invest directly in the economies of developed Europe. Rather, we focus on stocks trading at cheap prices with global earnings. Total (symbol TOT), an oil-and-gas company, is based in France. But its fortunes depend on energy prices and the success of exploration efforts in Africa and the Middle East. We also like Siemens (SI), a German conglomerate.
Should investors be nervous about China?
Growth is slowing, but China is still growing at a faster rate than the developed world. The Chinese government has the wherewithal to stimulate the economy, but it is shifting its focus to consumer spending instead of infrastructure. During that transition, investors may want to stay away, or be cautious.
What about emerging markets?
We trimmed our holdings in emerging markets in 2012. But with prices so low, we're thinking about building up our exposure again. We like Turkey, Poland, India, Thailand--and South Korea has gone on sale completely. We see fewer opportunities in Brazil and China.
The Japanese stock market has had a torrid run this year. Is it hard to find good buys?
Most of what we own in Japan has not participated in the big run-up. Take, for example, JGC (JGCCY), a fantastically well-managed company that builds energy-related facilities. This is the sort of stock that hasn't yet fully participated in the global bull market and is well positioned for the next wave of buying.