True Believers in Value Investing

Tweedy, Browne hunts bargains around the globe

In William Browne's office is a framed photo of a young Bill Gates, sitting on an airplane reading The Intelligent Investor. That America's richest man had been studying Browne's favorite book brings a smile to the face of the Tweedy, Browne Global Value Fund (TBGVX ) manager. The book's author, legendary value investor Benjamin Graham, was once a Tweedy, Browne client.

Indeed, Browne and his four co-managers, one of whom is his brother, Christopher Browne, stick to Graham's classic value strategy: Buy stocks at a discount to what knowledgeable buyers would pay in an acquisition or buyout. They decided to apply that principle to overseas investing when launching the fund, in 1993.

Although the fund can invest in the U.S., its portfolio weighting here has typically been 10% to 15%, much less than the 40% to 50% of most world funds, notes Standard & Poor's fund analyst Phil Edwards. Given that small exposure, Tweedy, Browne's performance has been exceptional, since foreign stocks have trailed U.S. stocks for many years. Since its inception, the fund has delivered a 10.4% annualized return, vs. 5.7% for its peers.

Browne and his partners have trumped their rivals in part through good stockpicking but also through hedging their foreign-currency exposure. During the past decade, that has helped immensely, as the dollar rallied sharply against other currencies, causing foreign stocks to lose money in dollar terms.

Still, even as the dollar has declined recently, this fund has outperformed its peers by steering clear of high-tech darlings that later bombed and by avoiding companies with questionable accounting practices. (Browne has a framed Enron stock certificate in his office, which he looks at whenever he needs a laugh.) Instead, the firm is buying unusual fare such as Sanyo Shinpan Finance, a small Japanese consumer lender. This company is trading at a fire-sale price, relative to other Japanese companies, and enlarging its loan portfolio at a healthy clip. "Oh, Sanyo Shinpan -- God, it's cheap!" marvels Tweedy co-manager John Spears. "I think it's selling for 60% of book value." A company selling for less than what its assets are worth -- Benjamin Graham would be pleased.

By Lewis Braham

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