“Our core stock selection philosophy centers on building a focused but diversified portfolio of international companies. We like to find industry leaders when they are out of favor, offering value in the context of long-term prospects. The portfolio will be invested primarily in the developed markets of Europe and the Asia Pacific region but does include some emerging-market holdings. We believe diversification among three types of stocks (basic value, consistent earners, and emerging franchises) provides the opportunity for our portfolio to produce positive total returns over time. Stock selection is a key element in achieving our investment objectives.”
— Lei Wang, and Di Zhou
We focus on constructing a core portfolio with potential to outperform benchmarks over time — with lower volatility. One way we mitigate volatility is via Thornburg’s three-basket diversification construct:
Basic Value: Companies generally operating in mature industries and which generally exhibit more economic sensitivity and/or higher volatility in earnings and cash flow.
Consistent Earners: Companies which generally exhibit predictable growth, profitability, cash flow and/or dividends.
Emerging Franchises: Companies with the potential to grow at an above average rate because of a product or service that is establishing a new market and/or taking share from existing participants.
While we respect the necessary role a benchmark plays in assessing management skill, we don’t use benchmarks as starting points in constructing the portfolio. We focus on individual security selection and managing risk.