"We are global value investors. We use a value-based research process to identify quality businesses at attractive prices around the world. We then seek to capture the advantages of global diversification within a focused portfolio of compelling ideas. We believe that the structure of the Thornburg Global Opportunities Fund — built on our core investment principles of flexibility, focus, and value — gives us a durable framework for value-added investing."
– Vinson Walden
Our goals are to use:
- Flexibility – to diversify and to enhance risk-adjusted returns
- Focus – to manage risk and improve returns
- A value-based framework – to identify opportunities at a significant discount to intrinsic value
Global Opportunities is Thornburg’s most flexible equity offering. The fund is diversified geographically, with the freedom to invest globally to enhance risk-adjusted returns. Historically, the U.S. has constituted approximately 30% to 50% of the portfolio, while emerging markets have made up about 5% to 20%.
Additionally, Global Opportunities benefits from market cap flexibility, an advantage we will seek to maintain.
We seek value and are careful to diversify by sector, but we do not hew to benchmark weights.
Thornburg believes that diversification beyond a certain number of holdings may yield only marginal performance benefits. In a focused portfolio, the task of analyzing, understanding, and tracking holdings is more manageable than with a portfolio of 100 to 200 securities.
Global Opportunities holds 30 to 40 positions, where the typical global fund (as represented by the Morningstar World Stock category) holds more than three times as many. We know what we own, and why we own it.
The first step in our investment process is to ask: What is the quality of the business? To understand this, we look at the company’s competitive position: reviewing barriers to entry, balance sheet strength, management quality, and more. We also evaluate return on capital, return on equity, alignment of interests with shareholders, margin structure, and other factors.
The second step is to ask: Is the company undervalued? We consider a number of metrics to determine ultimate free cash flow and asset value, including discounted cash flows, the capital intensity of the business, market versus book value, hidden assets, and possible value of strategic alternatives.
Finally, we determine whether there is a path to success. As a sort of reality check, we ask ourselves: what must happen in order for the stock to reach its price target?
We May Consider Selling a Holding When:
- A better investment opportunity emerges, with greater risk-adjusted expected return or a potential improvement in diversification benefit
- Its target price has been achieved or when the initial discount is diminished
- The investment thesis is no longer intact, due to a change in company fundamentals and/or our assessment of the outlook
Most world-stock funds are macro-driven, top-down products with 100+ holdings. Thornburg Global Opportunities is a fundamentally driven, bottom-up strategy with just 30 to 40 holdings.