Janus’s Brent Lynn just won the title of Morningstar’s Fund Manager of the Year for 2010 in the International Fund category. He recently talked to Morningstar on his investment philosophy and where he is finding value.
Lynn characterizes himself as a growth investor, but he get involved in turnaround plays. The bread and butter of his Janus Overseas Fund is about growth, but there is some turnaround value flavor too.
Lynn found in value in airline industry, which contributed to his fund’s success in 2010:
An example of that might be the airline industry, where we've had investments now for some time, where we think that consolidation and reductions in capacity have made it a more profitable industry than it has been in the past.
Lynn invests worldwide, especially in the emerging markets. But nowadays, he find more value close to home, I mean, Europe:
Carlson: Maybe you could expand a little bit on that, particularly within, say, European financials, where a lot of people have macroeconomic concerns?
Lynn: Yes, and I certainly share these concerns. In peripheral Europe, in particular, countries like Greece, like Ireland, clearly, there are very, very significant, what I call, sovereign balance sheet problems.
But on a macro basis, what we've seen is, as a result of these issues in peripheral countries, many of the core European countries, countries like France, like Spain, have been forced to proactively now try to address long-term fiscal structural issues. While near term that may be painful, I think longer term it may end up positive for long-term economic growth on the European continent.
With regards to financials in these countries, what we've tried to do is invest in what we believe are extremely high-quality franchises with very sustainable and high normalized levels of earnings and deposit franchises where there is flight to quality when there is a crisis situation, and where these companies are trading, many of them below book value, which we think does not reflect their normalized return profile.