WELLS MANAGERS DID QUITE WELL IN PACIFIC: WHEN SOUTHEAST ASIA WENT SOUTH, STAGECOACH HAD GALLOPED AWAY
Smelling the smoke before feeling the flames, Wells Capital Management’s Katherine Schapiro pulled her common trust fund’s investments…
Smelling the smoke before feeling the flames, Wells Capital Management’s Katherine Schapiro pulled her common trust fund’s investments — representing 4% of assets — from Southeast Asia last spring. She also reduced its Hong Kong exposure from 8% to 2%.
That nimble maneuver helped her sidestep the Asian bloodbath that followed. By late September, when Ms. Schapiro and co-manager Stacey Ho launched the firm’s Stagecoach International Equity Fund, a clone of its common trust fund, they had only 13% invested in Asia. Japanese stocks alone represented 9%, with Hong Kong companies making up another 3% and Taiwanese stocks the remaining 1%.
In October, a month after its launch to the public, when the bottom fell out of markets like Korea and Indonesia, Stagecoach emerged relatively unscathed. It sank by 4.2% in the fourth quarter, far less than the Europe Australasia Far East Index’s 7.8% decline in the same period. Of course, when Asia bounced back in January, the fund returned 2.3% compared to 4.6% for the EAFE index.
The fund, which had assets of $51.7 million at press time, has since upped its Japanese stake by 4.4 percentage points. The fund’s Asian holdings now represent 17% of assets. Ms. Schapiro expects tax cuts and other government initiatives to spur the Japanese economy. She and Ms. Ho purchased more stock in Honda Motor Co. and also put money into a food company, a specialty store and consumer credit company.
The fund now has 57% of its assets in Europe, 5% in Canada, 4% in Latin America, 1% in Australia/New Zealand, 9% in other countries and 7% parked in cash.
Even though she appears to have dodged a bullet by having little of Stagecoach’s funds invested in Southeast Asia, Ms. Schapiro, who joined the firm’s parent, Wells Fargo & Co. in 1992, says she didn’t set out to limit Asian investments. Instead, she puts individual companies through a screening process and ranks them according to their valuation, earnings growth, risk and management team.
Among the stocks she unloaded: Cycle a
nd Carriage of Singapore, which sells Mercedes-Benz automobiles there, and Korea Electric Power Co.
Even though the managers consider themselves bottom-up, emphasizing stock selection over country selection, they generally will rule out countries with volatile political or financial conditions.
It’s difficult to dismiss the importance of a company’s home base when deciding whether to invest, says Tricia O. Rothschild, Morningstar’s international editor.
“It’s legitimate to do a combination of both,” Ms. Rothschild says. “That’s what a majority of funds do. It’s a decent approach.”
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