This week, we speak with we speak with Sarah Ketterer, Chief executive officer and cofounder at Causeway Capital Management, an international value manager with $52 billion under management. She was Morningstar International Manager of the Year in 2017.
Ketterer notes “There is always a price for everything” where it eventually becomes too cheap not to own. There is a wave of money washing over the globe, and it has been mostly going to higher profile growth and momentum sectors. Low bond yields have scared equity investors, leading to a neglect of cyclical stocks during the decade following the financial crisis. Her favorite value names are trading at crisis-level valuations despite excellent balance sheets and strong business prospects.
Ketterer explains why indexing, momentum trading and crowding have led to many value names falling far below intrinsic value. Numerous European businesses are trading at such a discount like Volkswagen and BASF. She notes that “If you want to own the beneficiaries of recovery you need to own them during the dark gloomy periods.” When value snaps back it tends to do so very quickly. In her opinion, this makes today a great opportunity to make contrarian bets on European and EM value plays.
The firm’s methodology combines quantitative screening with bottom’s up stock selection. Its been a rough decade for both institutional and value investors; the good news is institutional clients look at value as a must own insurance policy.
You can stream/download the full conversation, including the podcast extras on Apple iTunes, Overcast, Spotify, Google Podcasts, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Next week, we speak with Academy Award winning producer Brian Grazer. His film and television credits include A Beautiful Mind, Apollo 13, Arrested Development, 8 Mile, Splash, Backdraft, Liar Liar and The Da Vinci Code; His TV productions include Arrested Development, Sports Night, and 24. His new book is Face to Face: The Art of Human Connection.
Sarah Ketterer’s favorite books
Thinking, Fast and Slow by Daniel Kahneman
Lethal White by Robert Galbraith