Thomas Russo: Investment Opportunities Abroad & Nestle (Invest For Kids Chicago Notes) ~ market folly

Thursday, November 10, 2011

Thomas Russo: Investment Opportunities Abroad & Nestle (Invest For Kids Chicago Notes)

At Invest For Kids Chicago yesterday, Thomas Russo of Gardner Russo Gardner gave a presentation on investment opportunities abroad and going long Nestle (NSRGY).

Be sure to check out all notes from Invest For Kids Chicago where numerous high profile hedge fund managers shared their latest investment ideas.

Find Better Opportunities Abroad

Russo has 70% non-US exposure and he's been looking at European ideas that generate revenue outside of Europe. He lists the benefits of investing globally:

1. Capacity to continue to reinvest in pursuit of corporate wide ROICS
2. Freedom from dividend burdens
3. Corporate ethics / culture knowledgeable
4. Corporate governance
5. Global talent pool
6. Global best practices
7. Lower valuation available (Euro companies loathed)
8. Reduce translation risk

Nestle (NSRGY): He likes that they're focused on better foods. The secure global parent company is much cheaper than underlying national divisions.

Russo focused on how companies must have a chance to reinvest (strength in brands). He alluded to Kraft Foods and its domestic history where the core business lacked ability to effectively expand overseas. He says you must have long tail to expand abroad.

Pernod Ricard: They went to China with large capacity to grow and invest. 15% of profits are in China and it's family controlled. India is a huge opportunity for spirits.

SAB Miller: The company just purchased Fosters and local brewed beer is a big opportunity. Their sales are rising but EBITDA margin is down and.

He says that market volatility is a friend of the long-term investor. It permits more efficient capital reinvestment, offers M&A opportunity, and enhances share repurchase opportunities. He also says that investment managers have to have the capacity to suffer, in 1999 he was down 2% while the market was up significantly.

At the Leaders in Investing Summit earlier this year, Russo said he likes SAB Miller as well.

You can view full notes from Invest For Kids Chicago here.

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