David Samra, who seeks overlooked stocks around the world for the Artisan International Value Fund, has not allowed success go to his head.
“I'm not a master of the universe,” said Mr. Samra, managing director of Artisan Partners and lead portfolio manager of the $5.4 billion fund. “We're sort of like auto mechanics. We get under the hood and spend our time understanding the business.”
Mr. Samra, 48, delves into unglamorous research tasks — plowing through transcripts of analyst calls, reading annual reports, interviewing line managers, senior management and former employees, and hitting the road for site visits.
He and fellow fund manager Daniel O'Keefe are looking for firms with a low stock price and upside potential.
“The price we pay for a security is the largest determinant of our outcomes,” Mr. Samra said. “We think the universe outside the United States is large enough where we can find asymmetric outcomes.”
The downturn in the global economy helps, he said.
“This is a very robust environment in which to operate, because prices are coming down,” Mr. Samra said.
The challenge is to glean the intrinsic value of companies that may have recently lost market share.
“We look out a couple of years and try to understand the normalized earnings power of our businesses,” Mr. Samra said.
Even though the companies that Mr. Samra selects may be underperforming at the moment, contributing to their low stock price, they have strong balance sheets and cash flow, along with good management. He is counting on those factors to spark a turnaround for the Artisan International Value Fund.
“Think of it as stacking the odds in your favor,” Mr. Samra said.
The fund's bets have paid off since it was established in 2002. Morningstar Inc. has pegged its three-year annualized return at 12.17%.
“We like the fund quite a bit,” said Greg Carlson, a senior fund analyst at Morningstar. “They've stuck to their discipline and produced a really good performance record with relatively low volatility.”
The fund won't necessarily burst out like a supernova in the investing sky during bull markets. But it is a steady performer when things are more sluggish.
“It's not a strategy that's going to do well in market rallies,” Mr. Carlson said. “They tend to do well in choppy markets, like in 2011, and relatively well in down markets.”
Over the past few years, the fund has done so well that it is now closed to most new investors. Limiting participation keeps the fund nimble and poised to jump on the next opportunity.
It's still open to investments from new 401(k)s, but others will have to wait. Mr. Samra, tongue-in-cheek, compared himself to the bouncers who used to keep him out of cool clubs.
“I was the guy they never let in,” joked Mr. Samra, an avid runner, swimmer and cyclist who is married and has two little girls. “Now it's my turn. It's revenge of the nerds.”
Investors can join another fund that Mr. Samra and Mr. O'Keefe manage, the Artistan Global Value Fund (ARTGX). It operates on the same principles as the international fund.
“The philosophy, the discipline, the process are exactly the same,” Mr. Samra said. “The only difference is, we're allowed to invest inside the U.S. as well as outside the U.S.”
The global value vehicle — established in 2007 — is relatively new, but it has potential, according to Mr. Carlson.
“We haven't rated that one yet, but we do like it,” Mr. Carlson said. “They've done a very good job of choosing stocks in the U.S. with discipline.”
When choosing foreign stocks, Mr. Samra considers cultural factors as much as financial fundamentals. He notes that corporate governance is strong in developed countries such as the United States, Britain, Canada, Australia and New Zealand. South Africa is making strides.
Although they have achieved consistently high growth, countries such as Brazil, Russia, India and China also carry investment risks for those not familiar with their social and political mores.
“What it means to be a minority shareholder in certain parts of the world is vastly different than what it means to be a minority shareholder in other parts of the world,” Mr. Samra said.
“As you wade into emerging markets, you're getting aggressive growth. As a minority shareholder, you better make sure you're getting the benefit of that growth.”
mschoeff@investmentnews.com
