Around the World in Search of Growth
OVERALL APPROACH
Managed in a bottom-up, fundamentally driven, hard-research intensive fashion.
Managers enjoy true multi-cap flexibility: they’re able to buy many small- and mid-cap companies that other international growth strategies cannot. International markets tend to be less efficient and news-driven, which favors this flexibility.
While value managers often start from a place of valuation and decide whether a company is a good business, International Growth ADR Strategy managers start from a place of growth and ask:
- Is there a long-term growth opportunity?
- Is it a good business?
- Is the valuation reasonable?
THE OPPORTUNITY SET
We look for:
Attractive growth characteristics: A large addressable market, long term structural tailwinds, secular growth drivers, and a high rate of growth with operational leverage.
Good businesses: High barriers to entry, quality management, durable competitive advantages, strong market share, high and sustainable margins.
Reasonable valuation: We consider growth prospects, business models, historical valuation ranges, conduct peer valuation comparisons, and look at investor sentiment.
DISTINGUISHING CHARACTERISTICS
Focus:Thornburg International Growth is more focused than many peers.
Risk management: We use a three basket approach (roughly equally weighted) to give us exposure to different types of growth stocks and provide an extra layer of diversification. We also diversify by country, sector and industry.
INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION
International Growth uses Thornburg’s basket construct; we attempt to keep the exposure to each basket roughly equal to provide optimal diversification balance.
Consistent growth companies exhibit steady earnings and revenue growth; these companies often have subscription or other recurring revenue profiles.
Growth industry leaders often have leadership positions in growing markets, sometimes with dominant market share, and tend to be larger and more established.
Emerging growth companies are typically growing rapidly, often carving out a niche in an existing market. They tend to be smaller, earlier-stage companies. We expect these companies to generate high returns over time, but with higher volatility.
