Picking
great
stocks
and
avoiding
disastrous
investments
enabled
the
Ranmore
Global
Equity
Fund
to
beat
the
S
&
P
500
over
the
past
two
years,
according
to
its
fund
manager.
The
fund,
run
by
portfolio
manager
Sean
Peche,
returned
31%
in
2023
compared
to
24%
for
the
S
&
P
500
.
The
performance
stands
out
further
for
making
those
stellar
returns
without
owning
any
of
the
so-called
”
Magnificent
7
”
technology
stocks
that
have
dominated
the
index
recently.
The
Ranmore
fund
also
outperformed
its
benchmark
with
1.8%
total
returns
in
2022
when
the
S
&
P
500
and
broader
indexes
nearly
fell
into
a
bear
market.
Key
to
outperformance
When
it
comes
to
stock
picking,
Peche
said
the
key
was
“to
find
a
few
great
winners
and
avoid
disasters.”
The
fund
manager
noted
that
even
some
top
growth
managers
who
owned
high-flying
stocks
like
Microsoft
and
Meta
underperformed
the
market
last
year
because
“a
few
stocks
in
the
portfolio
blew
up.”
Andrew
Lapping,
chief
investment
officer
at
Ranmore,
said
the
fund
had
great
returns
since
it
is
focused
on
overlooked
mid-small
caps
and
value
stocks,
saying,
“We
invest
in
areas
where
there’s
less
competition,
where
there’s
not
a
huge
flow
of
capital.”
The
fund
is
also
highly
diversified,
with
stocks
like
Brazil’s
Petrobras
,
Japan’s
Nippon
TV
,
the
U.K.’s
GSK
,
and
eBay
among
its
largest
positions.
The
fund
manager
says
they
take
a
probability-based
approach
with
many
small
positions
rather
than
a
few
big
bets.
“We
like
to
source
our
returns
from
lots
of
places
rather
than
just
one
or
two
big
ideas,”
Peche
said.
Where’s
Ranmore
investing
now?
While
many
in
Wall
Street
and
the
City
of
London
are
negative
on
Europe,
Ranmore
sees
opportunities.
For
instance,
Bank
of
America
strategists
see
the
pan-European
Stoxx
600
index
down
by
15%
to
420
points
in
the
last
quarter
of
this
year
over
a
slowdown
in
global
economic
growth.
Similarly,
UBS
has
a
price
target
pointing
to
a
nearly
10%
downside
for
the
European
benchmark.
.STOXX
1Y
line
Instead
of
being
bearish,
Ranmore
believes
the
key
is
picking
stocks
like
French
retailer
Carrefour
that
could
benefit
from
consumers
trading
down
to
cheaper
private
label
products
during
a
cost-of-living
crisis.
The
contrarian
positioning
isn’t
new
to
the
fund.
Peche
increased
exposure
to
Europe
after
the
Russian
invasion
of
Ukraine.
When
many
investors
were
bearish
toward
Europe,
the
fund
manager
concluded
that
“not
every
company
out
there
was
going
to
get
hurt”
by
higher
gas
prices
and
potential
recession.
Instead,
he
said,
“some
companies
are
actually
going
to
benefit.”
Lapping
also
noted
that
“there’s
actually
a
very
low
correlation
between
GDP
growth
or
lack
thereof
and
stock
market
returns.”
Yet,
he
observed
that
there
is
a
correlation
between
returns
and
valuation.
“And
for
us,
valuation
in
Europe
is
much
lower
than
valuation
in
the
U.S.,
and
we
find
more
opportunities.”
More
recently,
the
fund
has
been
buying
heavily
into
Chinese
stocks
like
Alibaba
,
despite
concerns
around
an
economic
slowdown,
which
Lapping
called
the
“number
one
opportunity”
given
compelling
valuations.
While
risks
remain,
Chinese
tech
giants
are
far
cheaper
than
their
U.S.
counterparts
and
have
less
dilution
from
stock-based
compensation
,
according
to
Lapping.
“Yes,
[the
economy
is]
weak,
there’s
problems,”
Lapping
said.
“When
you
look
at
the
valuation,
that’s
already
in
the
price.”
”
Alibaba
is
our
third
biggest
stock
[position]
now.
Why?
The
valuation
is
absolutely
compelling,”
Lapping
added.
‘Cheap’
stocks
that
could
‘double’
The
fund
owns
an
eclectic
mix
of
global
names
like
Dutch
bank
ABN
AMRO,
diverging
considerably
from
the
fund’s
benchmark.
“If
we
find
a
cheap
stock.
We
don’t
care
if
it’s
…
a
television
company
in
Japan
or
a
bank
in
Europe.
If
we
think
it’s
undervalued
with
good
return
prospects,
we’ll
buy
it,”
Lapping
said.
Nippon
TV,
for
example,
trades
at
about
half
its
book
value
over
concerns
around
Japan’s
shrinking
demographics
for
broadcast
television.
However,
according
to
the
fund
manager,
the
market
appears
to
be
undervaluing
its
cash
and
securities.
“Most
of
its
book
value
is
cash
and
investment
securities
in
listed
Japanese
companies,”
Peche
said.
“If
Nippon
TV
just
traded
at
book
value,
the
stock
could
double.”
A
similar
upside
case
exists
for
ABN
AMRO,
which
offers
a
10%
dividend
yield,
trades
at
half
tangible
book
value,
and
is
priced
at
five
times
earnings,
according
to
Peche.
This
ratio
is
an
important
metric
used
by
traders
to
gauge
the
value
of
a
stock.
“It’s
a
conservative
retail
bank
in
Holland,
where
in
the
Netherlands,
the
economy
is
doing
well,”
Peche
said.
“We
think
that
that
company
could
also
double.”
