![]() ![]() GH: And another metric, can you explain to our readers what ‘active share’ means, where I saw your last number was 92.ĮM: ‘Active share’ compares a fund’s composition versus its benchmark, and it looks at the individual weights of the stocks in the fund compared to the benchmark. Our company name turnover of stocks in and out of the fund completely is lower because we look three to five years ahead. If we buy a stock that appreciates, we might change the position size actively, and the flip side of that is true as well. I would say it's been a busy year, but it’s more driven by trading around positions due to our valuation sensitivity, rather than major portfolio changes. That seems high for a contrarian manager who buys a stock and then waits for the market to catch up.ĮM: Yes, the way you describe how we invest is exactly right. GH: A subject we don’t discuss much is the turnover of stocks in funds, and your fund’s turnover is about 50% per annum. On a bottom-up analysis, we're finding more compelling ideas coming from other parts of the world. If there is a better and cheaper equivalent industrial business in Germany versus the US, we will buy the German. ![]() Similarly, this puts us underweight the US, with about 40% of the fund in the US versus about 60% for our global benchmark, the MSCI World Index, but that’s due to our valuation focus. It’s the other side of being underweight the large technology stocks. GH: Delving into the portfolio, are you backing any themes or trends which you think the market has underappreciated?ĮM: We are overweight what you would think of as the classic value-oriented sectors, including financials, energy, materials and industrials. So since the inception of the Global Equity strategy, we currently have the highest exposure to the value factor that we've had for the full history of the fund. But a look at the data shows that's actually not true. But that gap varies over time and where we today, that gap closed a bit in 2022, now it’s opened up a bit, but it’s still at an historical extreme.Īnd third is that investors are worried about recessions, and there is an incorrect perception that value stocks always do poorly in recessions, so investors have flocked to the growth stocks. There always is a spread, and usually for good reason, because the better companies tend to grow a little bit faster, so we should pay higher multiples for those businesses. Second, the large size of the valuation spreads between low P/E multiple and high P/E multiple stocks. GH: But in 2023, we have seen another surge in NASDAQ, especially the biggest tech stocks, so how has that played out?ĮM: Yes, 2023 so far has been the reverse of 2022, but that’s only a few months, and we're no less excited about the opportunity set amongst value shares, for three reasons.įirst, the long-term trend line would need value shares to almost double relative to growth to return to trend. It was a tough environment for all value investors but in 2022 it started to change, and we think the current cycle is still at its early stages. We’ve only seen maybe four or five cycles like this over the last 200 years. What we saw from say 2006 until 2021 was a once in 50-year cycle where value shares underperformed growth shares by about 50%. We approach valuations by asking what a reasonable businessperson would pay for the entirety of a company if they were buying on the private market. We're not traditional value investors who focus only on low Price to Earnings (P/E) Ratios. What changed?ĮM: The biggest thing is that the environment changed. GH: The Orbis Global Equity Fund has experienced a good last 12 months but struggled in the previous few years. The Orbis Global Equity Strategy launched in 1990 and has assets of over $28 billion, of which $13 billion is sourced from Australian institutional and retail investors. He spoke to Firstlinks from his San Francisco office. He joined Orbis in 2013 and is a member of the institutional client servicing team and part of his role includes conducting investment and economic research. Eric Marais, CFA, is an Investment Specialist at Orbis Investments.
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