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Overseas exposure powers gains

Fund manager looks beyond N. America


Global fund manager Ian Riach has been reducing the U.S. focus in the Bissett Multinational Growth Fund in recent months.

Currently, 21 of the stocks in the $174-million fund are U.S. stocks, another 16 are American depositary receipts and two are Canadian. The Canadian holdings are Manulife Financial Corp. and Bank of Nova Scotia. The fund also has holdings in other countries including Japan, Mexico, Britain and Brazil.

But the bulk of those companies' revenues are generated outside the United States. They get on average about 53 per cent of their revenue from outside of North America; that is down from about 70 per cent at the beginning of the summer of 2005.

"It is not really that we wanted to de-emphasize the U.S. or emphasize Canada or anything like that," said Mr. Riach, who started co-managing the fund in August, 2005. Fred Pynn is the co-manager. "It is just when we do our bottom-up analysis, a lot of non-North American companies just look good," he explained.

The ADRs in the fund include ING Groep NV, Canon Inc. and Toyota Motor Corp. The majority of the ADRS are those of European companies, he said. "We still see some good value over in Europe and the U.K.," Mr. Riach said. Europe is behind the U.S. in the economic cycle; its interest rates are a little lower and its forecasted growth rate a bit higher than that of the U.S. Moreover, the profit cycle in Europe hasn't decelerated as much as in the U.S., he said.

The class F version of the Bissett Multinational Growth Fund is up 10.07 per cent year-to-date, which surpasses the 7.34-per-cent return in the 12 months ended Sept. 30.

Bissett Multinational

Top 10 holdings (as of Sept. 30, 2006)

Exxon Mobil Corp.4.03%
Citigroup Inc. 3.95
Canon Inc., ADR3.61
General Electric Co. 3.56
Johnson & Johnson 3.54
PepsiCo Inc. 3.5
ConocoPhillips 3.47
3M Co. 3.16
Microsoft Corp. 3.07

Canon Inc. (CAJ-N)

Canon Inc. has been a "spectacular performer" for the fund, Mr. Riach said. He is impressed by the Tokyo-based camera, office equipment and calculator supplier's record of consistently raising its dividend. He also noted that Canon has gone through a significant restructuring over the past four or five years. He expects Canon's profit will rise about 17 per cent this year. Canon, which trades as an ADR on the New York Stock Exchange (CAJ-NYSE), is trading at around 18 times the estimated 2006 share profit. The ADRs closed yesterday at $56.26 (U.S.). About a year ago, those same ADRs were changing hands at $34.38.

Allied Irish Banks (AIB-N)Mr. Riach describes Allied Irish Banks PLC (AIB-NYSE) as a core financial services holding. Allied Irish "generates about 50 per cent of its revenues in Ireland, which has been good for them as Ireland's economy has rebounded," he said. It also has operations in the United States and Britain and is the majority owner of the fifth-largest bank in Poland, which is an expanding market for Allied Irish. He also noted that Allied Irish has shown consistent double-digit profit growth. He expects the Dublin based commercial bank will show growth of around 20 per cent this year and also that it will boost its dividend. Furthermore, he said Allied Irish has "a very strong balance sheet." Allied Irish ADRs closed yesterday at $54.83.

3M Co. (MMM-N)

3M Co. (MMM-NYSE), the supplier of furnace filters and Scotch tape, went through some turmoil in the past year or so, Mr. Riach said. During that period, one of its divisions struck a rough patch and the company saw some management changes. Yet, St. Paul, Minn.-based 3M has continued to perform well, consistently increasing its cash flow and reducing its debt and raising its dividend, Mr. Riach said. 3M "still exhibits a lot of the characteristics that we like," yet the stock price didn't reflect it until the past few months, he added. "We continue to see decent value there," he added. The shares fell 22 cents to $79.24 yesterday.

© 2007 The Globe and Mail. All rights reserved.

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