(This article was originally published Tuesday.)
--Thornburg Developing World fund focuses on positive cash
flow
--It also likes to hold high-growth retailers
--The fund also focuses on markets with lower currency risk
By Liz Moyer
The Thornburg Developing World fund (THDAX), as the name
suggests, focuses on companies in emerging markets. The companies,
though, should generate positive cash flow with low leverage, and
the emerging countries should have current account surpluses,
lessening currency risk.
The $90 million fund holds a stake in Credicorp (BAP), the
largest financial holding company in Peru, where just three banks
control nearly all of the banking market. That means profit margins
are stable, says Lewis Kaufman, the fund's manager.
The fund also likes to hold high-growth retailers. It holds
PriceSmart Inc. (PSMT)--the largest operator of warehouse clubs in
Central America, South America and the Caribbean--and Thai retailer
CP All (CVPBF)--a 7-11 style chain.
The fund also owns Baidu (BIDU), the Google of China, which is
generating cash flow despite being a relatively young company, Mr.
Kaufman said.
Beyond picking individual stocks, the fund tries to focus
investments in markets where currency risk is lower relative to
other markets. So instead of putting a chunk of money in India, the
firm will invest in companies in nearby Indonesia and the
Philippines; and rather than Brazil, investments would be targeted
in Colombia or Peru.
"Most emerging markets funds are focused on long-term capital
appreciation. Our focus is incorporating risk-adjusted returns,"
Mr. Kaufman said.
Launched in late 2009, the fund has beaten its benchmark in both
up and down years. It gained 30.7% in 2010, was down 15.63% in 2011
and is up 7% year-to-date. Meanwhile the MSCI emerging markets
index was up 19.04% in 2010, down 18.3% in 2011 and is up 1.64%
year-to-date.
William Rocco, an analyst at Morningstar, says Mr. Kaufman
follows a proven stock-selection strategy of picking a mix of basic
value names, consistent earners and emerging franchises, very much
like the managers of the flagship Thornburg International Value
(TGVAX) fund.
Mr. Kaufman, a managing director at Thornburg, joined the firm
in 2005. Before that he was at Morgan Stanley and Citigroup. He has
a masters degree in business administration from Duke University's
Fuqua School of Business and an undergraduate degree in English
from Colgate University. He is a certified financial analyst.
Write to Liz Moyer at liz.moyer@dowjones.com
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