Top-Ranked Equity Fund Bets on Beaten-Up Stock in Cruises, Oil
Nov. 13 (Bloomberg) — As stock picks go, Carnival Corp. looks like a good bet to Braun, Von Wyss & Mueller AG, a Swiss- based investment firm that has earned top rankings by consistently outperforming rivals around the world.
In recent years, the Miami-based cruise operator has had to contend with outbreaks of illness aboard its liners, a fire that stranded thousands in the Caribbean, the Costa Concordia ship that capsized off Italy and, just last month, a suspected case of Ebola that sent shares into a dive. Its shares are down 12 percent since the start of 2011 compared to a 62 percent gain for the S&P 500 in that period.
“Carnival is totally out of fashion,” fund manager Georg von Wyss said in an interview earlier this month. Recent incidents “really hurt the brand image, but we don’t think it’s hurt forever, as it is a marketing problem you can solve.”
Von Wyss and fellow founders, Thomas Braun and Erich Mueller, consider themselves value investors, the strategy championed by one of their idols, Warren Buffett. Like the chairman of Berkshire Hathaway Inc., they scout around for stocks that they think have more potential than the price would suggest. Together they manage about 1.1 billion Swiss francs ($1.14 billion) split between two funds spread across some 30 companies in North America and Europe.
Since its inception in December 1997, their main fund, the BWM Classic Global Equity Fund, has delivered an annualized return on investments of 10.2 percent, almost 3.5 times the return of the Morgan Stanley Capital International World Index, which they use as a benchmark, according to the fund’s website. That performance has propelled it to the top of rankings for global equity funds.
Morningstar Inc. ranks the fund in the top percentile against its Global Flex-Cap Equity category, said its spokeswoman, Annette Larson. Of the 290 funds with a five-year return in that category, Classic Global Equity ranks second in absolute terms behind Old Mutual Global Equity R Acc. The fund’s five-year annualized return is 16.11 percent, according to the Chicago-based investment research firm.
“We really try to understand how a company works and what the financials tell us about it,” von Wyss, 50, said in a joint interview with Braun, 58, over coffee in Zurich. Von Wyss and Braun have been working together 17 years, having met while employed for a Swiss private bank. They note that their own money is managed by the firm, which employs six excluding the partners and is located in the Swiss village of Wilen, about 40 kilometers (25 miles) from Zurich.
For all the accolades, they acknowledge it may be hard to maintain their performance this year. The Classic Global Equity Fund averaged a return of 2.4 percent from the start of the year through Nov. 4, compared with a 12.1 percent return of the MSCI benchmark, a decline they attribute in part to the economic slowdown in Europe.
The firm took a first position in Carnival in the second quarter, expanding its stake in the three months through September to a total of 4.7 percent of the Classic Global Equity Fund and 4.8 percent of the smaller Classic Value Equity Fund. The managers allocated a similar chunk of the two funds to Norwegian Cruise Lines Holdings Ltd., another cruise operator they suspect is undervalued.
Betting on a rebound in oil prices, von Wyss said about 7 percent of the two funds is invested in that industry, including Akastor ASA, Norway’s oil services investment company, and Petrofac Ltd., Britain’s oil and gas engineer.
Less attractive to Braun and von Wyss are global banks like Morgan Stanley and UBS AG, their country’s No. 1 lender.
“It’s very hard to analyze bank assets, particularly if there is a lot of investment banking involved,” Braun said. Even after the European Central Bank’s just-completed asset review, banks are just “a bit too risky.”
To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Cindy Roberts, Steve Bailey
