Investors increasingly are looking beyond the U.S. stock market for strong returns as they anticipate slowing growth in 2018. With that in mind, the William Blair Global Leaders Fund (WGGNX) has delivered market-beating performance by seeking out companies with above-average returns on equity, strong balance sheets, and track records of above average earnings growth, Barron's reports. The fund has delivered a total return of just over 30% for the year-to-date through December 19, better than 86% of its peers, per Morningstar Inc. During the same period, peer group funds have gained 23% on average and the MSCI All-Country World Index ex-U.S. has returned 25%, also per Morningstar.
As a global fund, William Blair Global Leaders holds both U.S. and international stocks, looking for companies that "differentiate themselves in a way that gives them a more lasting competitive advantage over their peers," as co-manager Kenneth McAtamney tells Barron's. Among its current holdings, as discussed with Barron's, are these eight, with their YTD price gains through December 19, per Barron's:
The fund does not limit itself to a particular size or market cap category in making selections. Also according to Barron's, the fund is fairly concentrated, with only 60 to 80 stocks in its portfolio as a general rule. A key metric that the fund managers use is return on invested capital (ROIC).
Large But Still Growing
McAtamney tells Barron's that his team finds global leaders across the entire corporate life cycle. "We are looking for companies that can grow or defend their market share and reinvest their profits into their own business," he told Barron's. "We also own some very large companies that are not yet mature and still in the middle stage of growth." These include enterprise software company Salesforce.com, Chinese internet-based conglomerate Tencent, Chinese e-commerce giant Alibaba, as well as Amazon. All these companies are aggressively reinvesting profits to increase their large market shares even further, he notes.
Colorado-based Vail Resorts operates a number of mountain resorts and National Park concessions. Co-manager Andrew Flynn says that Vail has taken measures to lessen the seasonality in its operations, such as by selling skiing season passes that "generate 70% to 80% of its cash flow before the first snowflake has fallen." Flynn also told Barron's that "The company’s focus on value creation sets it apart and has helped it sustain midteens earnings growth."
Valeo is a French auto parts maker that has innovative products related to the latest advances in automobiles, such as lane-changing technology for automated driver-assistance systems, energy-saving transmissions, and infotainment applications. Flynn tells Barron's that Valeo is one of their "highest-conviction holdings."
Keyence, based in Japan, is a leader in developing advanced sensors for use in factory automation, as McAtameny indicates to Barron's. In the course of the last decade, their sales outside Japan have grown from 10% of the total to 50%. "Keyence has always had world-class operating margins and return on invested capital, and now they are pressing their advantage more globally," says McAtamney, per Barron's.
AIA Group is a Chinese-based insurer with notable growth in its health insurance segment. McAtamney calls this a "very underpenetrated market" and an "aspirational service" for consumers in emerging markets.