BUFFALO USA GLOBAL FUND
Global funds can make a lot of sense.They are able to invest in companies located anywhere on the globe, allowing them to take advantage of opportunities everywhere.
The Buffalo USA Global fund, (800-492-8332), does its global thing using only stocks made in the U.S.A. Tom Laming manages the fund with an eye toward the future.
"We operate off a road map of trends and try to identify developments that we see playing out over the next three to five years based on demographics," says Laming. " Over the next 10 years, for instance, the 45 to 54 year-old age group will grow by 23.2 percent and the 55 to 64 group will grow by 45.9 percent.
"That 45 to 54 age group is a group that's about the size of South Korea and growing 30 percent faster than Malaysia. Now that means nothing over the next quarter, two quarters or three quarters, but over a 10-year period it will."
Keeping about 34 stocks in the portfolio, here's more about how Laming manages the Buffalo USA Global Fund:
Q: What is the fund's investment objective?
Laming: To benefit from what the rest of the world is doing.
The rest of the world is growing faster than the U.S. So, what we thought about when we looked around the world prior to starting this fund were things like who is selling soft drinks to China; who is selling microprocessors into Asia and Europe; and who is selling operating systems? We kept asking the questions of what companies were benefiting most by foreign growth and kept coming back to the United States. So, we started a fund that only invested in U.S based companies that get at least 40 percent of their sales or income from outside the U.S.
A good example of such a company would be AFLAC.
Q: That quacking duck on TV?
Laming: That's right. That's been a good advertising campaign for them and has really raised the awareness of the company which is based in Columbus, GA but gets 85 percent of its business from Japan.
The good thing for us ( when investing in a global company like this) is that the company is based right here, they speak the same language, they speak the same accounting language, and trade on US exchanges.
To get back to the road map of trends, what Japan is going through right now is severe aging of the population. Their economy can't grow because there aren't enough people to do the work. That's bad for their economy but good for a company that sells cancer insurance. And that's exactly what AFLAC does over there.
Q: When I first looked at this fund earlier in the year, its performance was above water. Now it's under. What happened?
Laming: We've been doing the same thing that we've done since the fund's inception (1995) and that's invest for the long term. The largest sector that we're in, and have been since inception, that's hurting us the most is technology, Last year tech got hit hard; this year we are more heavily weighted toward semiconductors and they've really been hit hard. So, our stocks are down.
But, I don't expect to necessarily be outperforming every month, or every six months, and maybe not every year. If you would have done this interview in 1998, you would have said the same thing and that would have been exactly when you would have wanted to buy this fund.
Q: What are the names of some of the stocks that have hurt performance?
Laming: National Semiconductor, Applied Materials, Cisco, all those stocks were down a lot last year but the other stocks that we owned, like the drug stocks, more than offset them and that's why we were up nearly 9 percent in 2000.
Q: How about a winning one?
Laming: Lear Corporation, our largest holding, is an interesting company. Ford or GM design a product and companies like Lear are the ones that put it together in other countries. So Lear is really an outsourcer to the automotive industry and that stock has been very strong.
Q: Why is it important for investors to have a global component among their holdings?
Laming: The primary reason is that the only way to grow your economy is a combination of population growth and productivity growth. So, in the United States, we're pretty much limited to how much more work each of us does each year prior to the previous year. There's not that many more people, maybe one percent more, and in the rest of the world---most of it outside Europe---the populations are growing more quickly. So, the rest of the world is growing faster than the United States, for the most part, and that should lead to better growth rates for companies that sell into those markets.
Q: What about the risks involved?
Laming: We are definitely susceptible to market weakness' overseas and in the U.S. What we're trying to do is eliminate the risks associated with owning foreign securities yet still get all the benefits.
Buffalo USA Global Fund:
|TOP HOLDINGS||As of Feb. 28, Lear Corporation; Johnson & Johnson; Bristol-Myers Squibb; American International. Group; and AFLAC Inc.|
|PERFORMANCE||Year-to-date performance thru March 7, the fund was down 4.5 percent. At year-end 2000, the fund was up 8.8 percent and at year-end 1999, up 37.31 percent.|
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