CHICAGO — Is Nestle a Swiss stock?
Of course it is, if you look at the traditional measures. The company is based in Switzerland, and its stock trades in Swiss francs. But Nestle candy, baby food and other products are on grocery-store shelves throughout the world, from Algeria to Zambia. Switzerland provides just a sliver of Nestle’s revenue: More came last year from the Americas or from Asia than from Europe overall.
That’s the message several mutual fund managers stressed at the Morningstar Investment Conference in Chicago this week: It’s more important where a company does its business than where it’s based, and the line is blurring between U.S. and different types of foreign stocks.
“I’m paying less attention to the domicile or the country it’s listed in” when considering stocks, said Harry Hartford, co-manager at the Causeway International Value fund. “We’re more likely to be looking at companies in specific industries.”
Collectively European stocks, for example, generate more than half of their revenue outside Europe, said Robert Lovelace, who helps run the American Funds New World fund. That means investors may not be getting what they think they’re getting when they buy a European stock fund.
With Japanese stocks, Lovelace said the most well-run companies tend to be those that compete globally, such as automakers or electronics companies. Those that focus on just the Japanese market tend to be less efficient. So even though the statistics may show that his funds own Japanese stocks, “that is very different than me deciding I’m very excited about the Japanese economy,” he said. “In fact, the Japanese economy has very little to do with it.”
To be sure, bond fund managers don’t see it the same way. “In the bond world, nationalism still matters,” said David Rolley, who co-manages the Loomis Sayles Global Bond fund. “When you’re lending money, you’re lending money to the government of Japan. It is not as multinational as the equity market is.”
Among other ideas discussed at the Morningstar conference:
Rising interest rates
Bill Gross, who runs the world’s largest bond fund, talked about how investors should be preparing for a “new neutral.” Most investors expect the Federal Reserve to begin hiking short-term interest rates soon from their record low, the first in what is forecast to be many increases.