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Patience Is A Necessary Virtue For Value
Investors A Look Into The International
Value Investor Charles De Vaulx
June 06, 2014 | About: TSE:4503 +0% XSWX:NESN +0% DVN +0% BRK.A +0% ORCL +0%
Patience is a necessary virtue for value investors; patience to see
the market recognize some value it was previously ignoring; or,
more to the case now, patience to wait for the fat pitch, free of the
short-term vagaries of benchmarks.
-Charles de Vaulx (Trades, Portfolio)
Charles de Vaulx (Trades, Portfolio) is one of the international gurus
followed by GuruFocus. de Vaulx is the chief investment officer and
portfolio manager of International Value Advisers, an investment
management fund offering investing services to both U.S. Investors as
well as non-U.S. investors. The fund is located in New York, NY.
History
International Value Advisers, or IVA, is an investment management firm based in New York
that offers investment management services to institutions, qualified high net worth
individuals, and financial intermediaries worldwide. IVA was formed in October 2007, and
the management of this firm is orchestrated by five individuals: Charles de Vaulx (Trades,
Portfolio), CIO and Portfolio Manager; Chuck de Lardemelle, Portfolio Manager; Michael
Malafronte, Managing Partner; Simon Fenwick, Securities Analyst; and Thibaut Pizenberg,
Securities Analyst.
Charles de Vaulx (Trades, Portfolio) began his career in the French-based financial
company, Societe Generale Bank, as a credit analyst in 1985, after graduating from the
Ecole Superieure de Commerce de Rouen in France with what would be the American
equivalent of a Masters degree in Finance. From there he went on to SoGen Funds (later
to be called First Eagle Funds) and worked there as a securities analyst until August 1996
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when he was named associate portfolio manager. From 2000 to 2004, our guru worked as
a co-portfolio manager at the First Eagle Funds.
Moving up from that position, Charles was given his own portfolio to manage the Sofire
Fund Ltd. He was solely responsible for this fund when it won the Absolute Return Award
for Fund of the Year in the global equity category in both 2005 and 2006. Up until March
2007, de Vaulx was still with the First Eagle Global funds managing the Overseas, U.S.
Value, Gold and Variable Funds.
Charles de Vaulx (Trades, Portfolio) had quite the honor of working alongside of the
investing great Jean-Marie Eveillard (Trades, Portfolio) at First Eagle, where they both saw
great success and earned the Morningstar International Stock Manager of the Year. So it
came as quite the surprise when de Vaulx up and left First Eagle with essentially no
warning. De Vaulx was hand-picked to be Eveillards successor upon his retirement in
December 2004, so he held the position of lead portfolio manager as of January 2005. But
just a few short weeks after winning another Morningstar award, de Vaulx left First Eagle
shocking both the industry and the media and forcing Eveillard to return from his retirement.
After his abrupt departure from First Eagle, in 2008, de Vaulx joined the budding fund,
International Value Advisers (IVA), as a partner and portfolio manager. The guru now leads
IVA as the funds portfolio manager and chief investment officer.
Achievements
In 2001, Charles de Vaulx (Trades, Portfolio) was awarded the Morningstar International
Stock Manager of the Year Award along with his co-manager, John-Marie Eveillard.
According to Morningstar, in order to achieve this award the fund manager must hold
superior returns in the current year, maintain a consistent outperformance over a long
period of time, and hold sound and consistent strategies.
De Vaulx was also runner up for this award in 2006.
In both 2005 and 2006, Charles de Vaulx (Trades, Portfolio) was the sole manager of the
Sofire Fund when it won an Absolute Return Award. This award was for Fund of the Year
in the global equity category. These awards identify the best performing US-based hedge
fund managers based on risk adjusted returns as tracked by Hedge Fund Intelligence.
Investing Philosophy
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According to the funds website, IVA employs an atypical investment strategy. The fund
seeks to preserve capital in their short-term investments (12-18 months), while their longer-
term investments (5-10 years) are the investments where they attempt to perform better
than the comparable equity indices. The fund also employees a global strategy which is
utilized to protect investors from the economic down falls of a specific country. The fund
claims that their investment approach is very different from the traditional approach
because they are trying to deliver returns that are as absolute as possible, basically
meaning that theyre primary concern is to be as resilient as possible in down markets.
The fund enacts their eclectic investment strategy by:
Maintaining a diversified portfolio (100 to 150 stocks). For the most part these companies
are utilized for diversification, and are not focused based on company size.
Attempting to capture equity-type returns through fixed income securities.
Holding some gold as a strong hedge in inflationary or deflationary periods.
Holding cash when there are not enough cheap securities the fund likes.
In the IVA Funds most recent letter to their shareholders they highlight this investing
strategy by showing that their cash exposure rose because they trimmed or sold several
positions, and they were not that fond of any new investment opportunities. You can read
the funds first quarter 2014 letter to shareholders here.
The fund takes pride in their flexible approach. And while they typically employ a bottom-up
approach in seeking businesses trading at what they consider to be a meaningful
discount, they are also open to holding securities of all asset classes and through various
market capitalizations.
Portfolio and Performance Data
Charles de Vaulx (Trades, Portfolio)s portfolio management style, specifically, could be
defined as long term value investing. Looking at his previous and current portfolio holdings,
it is easy to see that the guru tends to invest in companies that hold strong cash flows and
also happen to be selling at some discount. He picks these companies with high cash
flows because they tend to turn into higher yields for investors. Through this technique, his
portfolios often have higher yields than the comparable index.
Along with favoring companies with strong cash flow, de Vaulx also holds a notable amount
of cash. Looking back at his time at First Eagle, we can see that the guru has the tendency
to underperform in the up markets during bubbles such as the dot com bubble. This is
also where his large cash holdings came in and helped mitigate the impacts of several
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stock market corrections.
Charles de Vaulx (Trades, Portfolio) is the chief investment officer and portfolio manager of
both of IVAs portfolios the IVA International Fund (Trades, Portfolio) and the IVA
Worldwide Fund.
As of March 31, 2014 de Vaulxs Worldwide Fund maintained $9,892.1 million in net
assets. Its quarter-end performance data can be seen in the chart below.
This portfolio is utilized to seek long-term growth of capital through investing in various
securities and asset classes from markets across the world, including the United States.
De Vaulxs International Fund, which has been around since 2008, holds $3,548.6 million in
assets, and its quarter-end performance can be seen in the chart below.
This fund is utilized to seek long-term growth of capital by investing in various securities
and asset classes from stock markets throughout the world.
As of the close of the first quarter de Vaulxs IVA Worldwide Fund boasts 98 stocks, buying
no new stocks and selling out of four during the past quarter. This portfolio is valued at
$5.09 billion and maintains a quarter over quarter turnover ratio of 2%. The following five
companies are his five largest stock positions and make up for over 25% of his entire
portfolio.
1. Astellas Pharma (TSE:4503): de Vaulx holds on to 27,078,000 shares of Japan-based
Astellas Pharma, representing 6.3% of his portfolio. The guru maintained the same position
over the past quarter. Check out more information on de Vaulxs holding of Astellas Pharma
here.
2. Nestle SA (XSWX:NESN): Charles de Vaulx (Trades, Portfolio) holds on to 4,220,716
shares of Nestle SA, representing 6.2% of his portfolio. The guru has held the same position
since the third quarter of 2013. Check out more information on de Vaulxs holding of Nestle
here.
3. Devon Energy Corp (DVN): The guru holds on to 4,097,287 shares of the companys
stock, representing 5.4% of his total assets managed as well as 1.01% of the companys
shares outstanding. The guru has maintained this position since the third quarter of 2014.
Check out more information on de Vaulxs holding of Devon Energy here.
4. Berkshire Hathaway (BRK.A): The guru holds on to 1,339 shares of Berkshire Hathaway,
representing 4.9% of his total portfolio. The guru last altered his holdings in BRK.A during
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Klausbella - 1 week ago
His performance against the S&P is below par. Why do you quote him?
Comments
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the third quarter of 2013, and since then the price per share is trading up about 10.1%.
Check out more information on the gurus holding of Berkshire Hathaway here.
5. Oracle Corporation (ORCL): Charles de Vaulx (Trades, Portfolio) holds on to 4,975,822
shares of Oracle, representing 4% of his portfolio and 0.11% of the companys shares
outstanding. Over the past quarter, de Vaulx cut his holdings by -12.52%, and since then the
price per share has increased 9.8%. Check out more information on de Vaulxs holding of
Oracle here.
In conclusion, we have a lot to learn from IVAs star chief investment officer and portfolio
manager. Through looking at Charles de Vaulx (Trades, Portfolio)s combination of
international and U.S.-domestic stocks, investors who are looking to expand internationally
are given an excellent example and reference point.
If you cannot see Charles de Vaulx (Trades, Portfolio)s portfolio, you might not
have the GuruFocus Global Membership. Try a free Global 7-day trial here!
Also check out:
Charles de Vaulx Undervalued Stocks
Charles de Vaulx Top Growth Companies
Charles de Vaulx High Yield stocks, and
Stocks that Charles de Vaulx keeps buying
Rating: 5.0/5 (1 vote)
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