"Of Mutual Interest"-Bernard Horn, Fund Manager of the Polaris Global Value Fund
Tuesday, November 06, 2007PAUL KANGAS: With the recent market volatility, many investors are looking for a mutual fund that can show consistent performance over the long term. One fund investors may want to consider is Polaris Global Value Fund. While its returns so far this year have been below the benchmark for its category, the numbers further out tell a different story with an annualized return of 21 percent over the past five years. Bernard Horn, Jr. has managed this fund since it began as a limited partnership in 1989. And Bernie, welcome to the NIGHTLY BUSINESS REPORT.
BERNARD HORN JR., FUND MGR., POLARIS GLOBAL VALUE FUND: Thank you, Paul. It's quite an honor to be here this evening with you.
KANGAS: Global and value are the two descriptive terms that are in your fund's name. Does that mean that you're searching for companies that are good values regardless of where they're located?
HORN: Absolutely, Paul. We're looking for companies that generate good, strong sustainable free cash flow and we're willing to go virtually anywhere in the world, any sector, any country.
KANGAS: It's interesting to note that your American stocks make up a third of your portfolio, double the position of any other country. Does that mean that you find the American market to be generally undervalued relative to the rest of the world?
HORN: Actually Paul, we think that the American market is still a bit overvalued relative to the rest of the world. We've got two-thirds of the portfolio outside of the U.S., and the U.S. exposure is a bit below its benchmark weighting. So right now we feel that the market in the U.S. is good value in certain areas, but not everywhere.
KANGAS: Even before the recent sell-off in financial stocks, the biggest sector of your portfolio was the financials and of course, that's been a factor in your underperformance this year. But are you sticking with the financials?
HORN: We absolutely are. We've noted that the financials are getting better and better value all the time and specifically we think that the European financials are extremely good value. They've been unduly hit by some of the institutions that have taken quite a lot of risk. That's a stretch for good, high yields. The problem is that the risk has backfired and unfortunately, that's sent all financial stocks down, not just the ones that took high risk.
KANGAS: You have less than a minute left. At the end of September, your fund's biggest holding was Marathon Oil. Is that still the situation?
HORN: Yes, Paul, it is. It's a great holding with good low-risk assets and expanding production.
KANGAS: What other individual companies do you like right now?
HORN: We like -- in the European financials we really think that Anglo Irish Bank of Ireland and Lloyd's Bank are extremely undervalued. We think that in three to five years we're going to make terrific returns on those.
KANGAS: For the record, do you personally own any of these stocks that you've mentioned?
HORN: Virtually all my money Paul is invested in the funds that we run, so absolutely yes.
KANGAS: So you own them indirectly?
HORN: Absolutely.
KANGAS: All right. I want to thank you very much for being with us, Bernie.
HORN: Thanks, Paul and good evening.
KANGAS: Very interesting indeed, my guest, Bernard Horn Jr. of the Polaris Global Value Fund.
