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The Ranmore Global Equity Fund has been able to outperform the S&P 500 over the past two years by picking good stocks and avoiding disastrous investments, according to its fund manager. The fund, run by portfolio manager Sean Pesch, returned 31% in 2023, compared to a 24% return for the S&P 500. This performance is made even more remarkable by the fact that these impressive gains were made without owning any of the so-called “Magnificent 7” technology stocks that have recently dominated the index. The Ranmore Fund also outperformed its benchmark with a total return of 1.8% in 2022, when the S&P 500 and other indexes were in a near-bear market. The key to outperformance When it comes to stock selection, Pesce said the key is to “find a few good winners and avoid disaster.” The fund manager said that even some top growth managers who owned high-flying stocks like Microsoft and Meta underperformed the market last year as “some stocks in their portfolios crashed.” It pointed out. Andrew Lapping, Ranmore’s chief investment officer, said the fund has generated strong returns because it focuses on overlooked small- and mid-cap stocks and value stocks. “We are investing in areas where there is not a lot of capital flow.” ” The fund is highly diversified, with its largest positions including stocks such as Brazil’s Petrobras, Japan’s Nippon Television, Britain’s GSK and eBay. The fund manager said it is taking a probability-based approach with many small positions rather than a few big bets. “We want to source revenue from many places, not just one or two big ideas,” Pesce says. Where is Ranmore investing now? While many on Wall Street and the City of London are negative about Europe, Ranmore sees opportunity. For example, Bank of America strategists believe the pan-European Stoxx 600 index fell 15% to 420 points in the final quarter of this year due to a slowdown in global economic growth. Similarly, UBS has a price target that is nearly 10% below the European benchmark. .STOXX 1Y Rhine Rather than be bearish, Ranmore said he believes stocks such as French retail giant Carrefour could benefit from consumers turning to cheaper private label products during the cost of living crisis. I think the key is to choose. Contrarian positioning is nothing new for funds. After Russia’s invasion of Ukraine, Pesce increased its exposure to Europe. At a time when many investors were bearish on Europe, the fund manager concluded that “not all companies will be hurt” by high petrol prices and a potential recession. In fact, “some companies will actually benefit,” he said. Lapping also pointed out that “there is actually a very low correlation between the presence or absence of GDP growth and stock market returns.” Still, he noticed a correlation between returns and valuations. “And for us, the valuations in Europe are much lower than the valuations in the United States, so we see more opportunities.”Despite concerns about the economic slowdown, the fund recently It’s been buying a lot of Chinese stocks, which Mr. Lapping called “the biggest opportunity,” given their compelling valuations. While there are still risks, Lapping said, Chinese tech giants are much cheaper and less diluted by stock-based compensation than their American counterparts. “yes, [the economy is] “It’s weak, it’s problematic,” Rapp said. “If you look at the valuation, it’s already priced in,” he said. “Alibaba is our third largest stock.” [position] now. why? “The valuation is absolutely compelling,” Rapp added. ‘Cheap’ stocks that could ‘double’ The fund has an eclectic holding of global stocks such as Dutch bank ABN AMRO, which deviates significantly from the fund’s benchmark. “If you can find stocks that are cheap,” he added. We don’t care if it’s a Japanese TV company or a European bank. “If we think there’s a good revenue outlook and we think it’s undervalued, we’ll buy it,” Lapping said. For example, Nippon Television is trading at about half its book value due to concerns about the decline in Japan’s television broadcasting population. However, according to the fund manager, Mr. Pesce said, “Most of Nippon Television’s book value is cash and investment securities of listed Japanese companies.If Nippon Television were trading at book value, the stock price would double.” “It could be,” Pesce said. Pesce said ABN Amro has a 10% dividend yield and trades at half its tangible book value, trading at a price-to-earnings ratio of 5 times, which traders use to gauge the value of a stock. It is said to be an important indicator. “This is a conservative retail bank in the Netherlands, where the economy is doing well. We think this company has the potential to double as well,” Pesce said.
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