We're also optimistic about media companies. It's a growth industry but they're at depressed prices because of the recession. A Swiss company called Tamedia, which has a monopoly on German-speaking print and radio, trades at seven or eight times EBITDA [earnings before interest, taxes, depreciation, and amortization]. Aegis Group, based in London, is near a five-year low.Q: Your fund's biggest country weighting is Britain. What makes it a good place to find value?A: Britain has a corporate-governance system that helps ensure that companies are, in fact, run for owners of the business. There is clear agreement that businesses have to be run to make money. The Netherlands, for example, still has built-in poison pills against hostile takeovers, which just protects mediocrity. Also, Britain has a large number of private pension funds that make sure that if a company is sleepy for too long, some changes will be made. That tends to keep management focused on returns.Q: Are you invested in emerging markets?A: We have somewhere around a 14% exposure to emerging markets, [including] South Korea, Israel, Mexico, and Brazil. The beauty of what's happening in the global economy is that political decision-makers have less power than ever before, vs. the power of supply and demand. That's causing a lot of discipline in emerging markets these days.Q: Your fund has an 18.9% weighting in the Pacific Rim. What's your take on that region?A: Japanese stocks are undervalued, but it's a challenge to find quality. We've added Takeda Chemical Industries. Takeda has some very good compounds, and instead of remaining insulated in Japan, it went out and did deals with foreign companies to get distribution in Europe and the U.S., and it's selling at a low price.
More interesting than Japan is Hong Kong, where we like clothing retailer Giordano, and South Korea, which has gone through a dramatic economic transformation. The small and midsize companies are extremely competitive, very profitable, and very high-growth. We added to our South Korea exposure when stocks were at fire-sale prices in 1997-98. We've been trimming lately, just because of the sheer amount of appreciation these companies have had. We're still at a 5% or 6% weighting, but that's off from 8% or 9%. And Australia is a very high-growth country. There is almost a guaranteed flow of money into the equity markets because of their private pension scheme.Q: Why so many smaller companies in your portfolio?A: The stocks that fit our criteria tend to be more in the mid-cap range, but we don't target it. I've always believed that it's tough to find a good, high-quality business that has $100 billion a year in revenues. Everyone knows about it, so it's not exploitable. I mean, how cheap could Coca-Cola Co. ever get?