"Our research process identifies quality businesses at attractive prices around the world. We seek to capture the advantages of global diversification within a focused portfolio of compelling ideas. Built on our core investment principles of flexibility, focus, and value, the fund gives us a durable framework for value-added investing."
– Vinson Walden
- 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 Fund is Thornburg’s most flexible equity offering. The fund is diversified geographically, with the freedom to invest globally to enhance risk-adjusted returns.
Additionally, the fund benefits from market capitalization flexibility, an advantage we will seek to maintain. We seek economic 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. The fund typically holds 30 to 40 positions. In a focused portfolio, the task of analyzing, understanding, and tracking holdings is more manageable than with a portfolio of 100 to 200 securities.
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 cash vs. accounting earnings, the capital intensity of the business, market versus book value, hidden assets, and possible value of strategic alternatives.
Finally, we ask: Is there 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.