Nicholas-Applegate evaluates investment opportunities on a bottom-up company-by-company basis. This is the heart of Nicholas-Applegate's investment philosophy.
The company picks stocks based on its philosophy of identifying companies that are adapting well to change. The goal is to buy companies experiencing positive, sustainable change when the stock is a timely investment. Often the companies are benefiting from globalisation, deregulation, restructuring, and have an emphasis on shareholder value.
This method of bottom-up stock picking helped the firm's portfolio management teams virtually to eliminate our international portfolios' exposure in South East Asia prior to the region's recent currency crisis, yet at the same time allowed them to identify a few export-oriented stocks that actually benefited from currency devaluation and added value to the firm's portfolios.
For example, Indonesia currently holds a rating of -1.8 on our internal country weightings scale, which rates each country on a scale of -2 to +2 based on its political, economic, monetary and technical strength.
However, despite this extremely negative environment, the company's bottom-up method of selecting stocks identified companies such as Gulf Indonesia for its Emerging Countries Fund. Gulf Indonesia is an independent oil and natural gas company that exports its products and generates 100% of its revenues in US dollars. The company is a direct beneficiary of the rupiah's devaluation.
Bottom-up stock selection also led the firm's portfolio management teams to choose Sony for the Worldwide Growth Fund, based on several factors. Sony has proven itself extraordinarily competitive in an environment of increasing globalisation. A global leader in consumer electronics, Sony showed strong earnings for the first half of the year, with operating profits up 62%.
Another stock purchased for its increasing strength in the global marketplace is Newcourt Credit Group, an independent financial services company in Canada. The company completed four acquisitions last quarter and is negotiating the acquisition of AT&T Capital, making it the second largest financial services company in the US.
Such moves are making Newcourt a dominant force in the world's financial services arena.
Catherine Somhegyi is partner and chief investment officer, global equity management, and Larry Speidell is partner and director of global/systematic portfolio management and re-search, at Nicholas-Applegate