"Market Monitor"-Gary Motyl, CIO, Templeton Global Equity Group
Friday, July 17, 2009PAUL KANGAS: My guest "Market Monitor" this week is Gary Motyl, chief investment officer of the Templeton Global Equity Group. And Gary, welcome back to the NBR.
GARY MOTYL, CHIEF INVESTMENT OFFICER, TEMPLETON GLOBAL EQUITY: A pleasure to be here, Paul, thank you.
KANGAS: Now, you take a value-oriented approach to global investing. What`s your current opinion on the world markets?
MOTYL: We think the world markets are still undervalued and do offer good potential over the next one to three to five years.
KANGAS: A bull?
MOTYL: A bull but not an outrageous bull.
KANGAS: OK. Are the economic stimulus programs working here and abroad?
MOTYL: I think in the United States, the stimulus programs really haven`t kicked in yet. We`re seeing more evidence internationally that some of those programs are having an effect, specifically in China.
KANGAS: How about the threat of inflation that this stimulus thing might just bring upon us?
MOTLY: I think long-term, that`s something we`re going to monitor. I would note that unemployment rates are still fairly high across the world and in most industries, there`s still significant over capacity. So I`m not sure that inflation is a problem in the near or intermediate term.
KANGAS: OK. What are the most attractive countries in your opinion and why?
MOTYL: We`re finding good value in virtually every country right now. Low valuations are abundant in the United States as well as in Europe. Whereas in Europe, I think most of the companies that we`re investing in do have a more global outlook as opposed to being focused within the European community.
KANGAS: What industries are your favorites and why?
MOTYL: One area that we find very attractive right now is the technology area. This is an area being value investors that we really don`t get the opportunity to invest in frequently. Right now the valuations look very good. This group has under performed the markets in the last 10 years and I think we`ve got a number of stocks we like, one of which is Taiwan Semiconductor Manufacturing (TSM). This is listed on the big board, symbol TSM, world leader in semiconductor manufacturing, great technology, great balance sheet, cash in excess of debt, 5 percent dividend yield, very, very strong competitor in all its markets and we look to have this company growing nicely in the next few years.
KANGAS: OK. Another industry you like?
MOTYL: Telecommunications is one which has been a little under the radar over the last few months but we think it still offers very good value, especially on a total return basis. Many stocks there have very strong balance sheets, good dividend yields and a stock that we like at the moment is Telefonica (TEF) in Spain. This company has a very good (INAUDIBLE) business within Europe, but also gets about 40 percent of their revenues from Latin America, so you get an emerging markets kicker as well.
KANGAS: This trades on the big board TEF, right?
MOTYL: Correct.
KANGAS: OK and let`s have another industry that you`re fond of.
MOTYL: Something a bit controversial is health care. Obviously we`re all aware of what is going on with potential health care legislation but we think the valuations are attractive and discount some of those problems. Novartis (NVS) is a company which is headquartered in Europe.
KANGAS: Switzerland?
MOTYL: In Switzerland, correct. It trades on the New York Stock Exchange under the symbol in NVS, here again, a stock with low P/E multiple, 4 percent dividend yield, good breadth of business and one thing I don`t know that people are focusing in on is the potential for pharmaceutical companies particularly in Europe to tap into some of the emerging markets as those economies expand and the governments try to improve their health care delivery systems.
KANGAS: OK. We have a minute left for one more industry you like and one choice.
MOTYL: In the financial area, I think there`s an interesting stock. It is, however, not listed in the United States. It trades on the Frankfurt and Munich stock exchanges, German company called Munich Reinsurance. This company is the second largest reinsurance company in the world, again, strong balance sheet, AA minus debt rating, very good dividend yield of about 6 percent. They`re going to be able to take market share and really benefit from a good pricing environment in that area over the next few years.
KANGAS: We don`t have a chart on the Munich Re because it doesn`t trade anywhere in the states but you explained it very nicely what it`s all about. Gary, do you personally own these stocks or have any other disclosure?
MOTYL: I don`t own them directly but I do own them through the various Templeton mutual funds that I hold personally.
KANGAS: Fair enough. I`m afraid our time is up but I want to thank you for being with us again; it`s been a pleasure.
MOTYL: Thank you, Paul.
KANGAS: My guest Gary Motyl of the Templeton Global Equity Group.
