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“Patience is a necessary virtue for value investors” – A Look into the International Value Investor Charles de Vaulx

Monica Wolfe

Monica Wolfe

121 followers

“Patience is a necessary virtue for value investors; patience to see the market recognize some value it was previously ignoring; or, more to the case now, patience to wait for the fat pitch, free of the short-term vagaries of benchmarks.”

-Charles de Vaulx (Trades, Portfolio)

Charles de Vaulx (Trades, Portfolio) is one of the international gurus followed by GuruFocus. de Vaulx is the chief investment officer and portfolio manager of International Value Advisers, an investment management fund offering investing services to both U.S. Investors as well as non-U.S. investors. The fund is located in New York, NY.

History

International Value Advisers, or IVA, is an investment management firm based in New York that offers investment management services to institutions, qualified high net worth individuals, and financial intermediaries worldwide. IVA was formed in October 2007, and the management of this firm is orchestrated by five individuals: Charles de Vaulx (Trades, Portfolio), CIO and Portfolio Manager; Chuck de Lardemelle, Portfolio Manager; Michael Malafronte, Managing Partner; Simon Fenwick, Securities Analyst; and Thibaut Pizenberg, Securities Analyst.

Charles de Vaulx (Trades, Portfolio) began his career in the French-based financial company, Societe Generale Bank, as a credit analyst in 1985, after graduating from the Ecole Superieure de Commerce de Rouen in France with what would be the American equivalent of a Master’s degree in Finance. From there he went on to SoGen Funds (later to be called First Eagle Funds) and worked there as a securities analyst until August 1996 when he was named associate portfolio manager. From 2000 to 2004, our guru worked as a co-portfolio manager at the First Eagle Funds.

Moving up from that position, Charles was given his own portfolio to manage – the Sofire Fund Ltd. He was solely responsible for this fund when it won the “Absolute Return Award” for “Fund of the Year” in the global equity category in both 2005 and 2006. Up until March 2007, de Vaulx was still with the First Eagle Global funds managing the Overseas, U.S. Value, Gold and Variable Funds.

Charles de Vaulx (Trades, Portfolio) had quite the honor of working alongside of the investing great Jean-Marie Eveillard (Trades, Portfolio) at First Eagle, where they both saw great success and earned the Morningstar “International Stock Manager of the Year.” So it came as quite the surprise when de Vaulx up and left First Eagle with essentially no warning. De Vaulx was hand-picked to be Eveillard’s successor upon his retirement in December 2004, so he held the position of lead portfolio manager as of January 2005. But just a few short weeks after winning another Morningstar award, de Vaulx left First Eagle – shocking both the industry and the media and forcing Eveillard to return from his retirement.

After his abrupt departure from First Eagle, in 2008, de Vaulx joined the budding fund, International Value Advisers (IVA), as a partner and portfolio manager. The guru now leads IVA as the fund’s portfolio manager and chief investment officer.

Achievements

In 2001, Charles de Vaulx (Trades, Portfolio) was awarded the Morningstar “International Stock Manager of the Year” Award along with his co-manager, John-Marie Eveillard. According to Morningstar, in order to achieve this award the fund manager must hold superior returns in the current year, maintain a consistent outperformance over a long period of time, and hold sound and consistent strategies.

De Vaulx was also runner up for this award in 2006.

In both 2005 and 2006, Charles de Vaulx (Trades, Portfolio) was the sole manager of the Sofire Fund when it won an Absolute Return Award. This award was for “Fund of the Year” in the global equity category. These awards identify the best performing US-based hedge fund managers based on risk adjusted returns as tracked by Hedge Fund Intelligence.

Investing Philosophy

According to the fund’s website, IVA employs an “atypical investment strategy”. The fund seeks to preserve capital in their short-term investments (12-18 months), while their longer-term investments (5-10 years) are the investments where they attempt to perform better than the comparable equity indices. The fund also employees a global strategy which is utilized to protect investors from the economic down falls of a specific country. The fund claims that their investment approach is very different from the traditional approach because they are trying to deliver returns that are “as absolute as possible,” basically meaning that they’re primary concern is to be as resilient as possible in down markets.

The fund enacts their “eclectic” investment strategy by:

  • Maintaining a diversified portfolio (100 to 150 stocks). For the most part these companies are utilized for diversification, and are not focused based on company size.
  • Attempting to capture “equity-type returns” through fixed income securities.
  • Holding some gold as a strong hedge in inflationary or deflationary periods.
  • Holding cash when there are not enough cheap securities the fund likes.

In the IVA Funds’ most recent letter to their shareholders they highlight this investing strategy by showing that their cash exposure rose because they trimmed or sold several positions, and they were not that fond of any new investment opportunities. You can read the fund’s first quarter 2014 letter to shareholders here.

The fund takes pride in their flexible approach. And while they typically employ a bottom-up approach in seeking businesses trading at what they consider to be a “meaningful discount,” they are also open to holding securities of all asset classes and through various market capitalizations.

Portfolio and Performance Data

Charles de Vaulx (Trades, Portfolio)’s portfolio management style, specifically, could be defined as long term value investing. Looking at his previous and current portfolio holdings, it is easy to see that the guru tends to invest in companies that hold strong cash flows and also happen to be selling at some discount. He picks these companies with high cash flows because they tend to turn into higher yields for investors. Through this technique, his portfolios often have higher yields than the comparable index.

Along with favoring companies with strong cash flow, de Vaulx also holds a notable amount of cash. Looking back at his time at First Eagle, we can see that the guru has the tendency to underperform in the up markets during bubbles such as the “dot com bubble.” This is also where his large cash holdings came in and helped mitigate the impacts of several stock market corrections.

Charles de Vaulx (Trades, Portfolio) is the chief investment officer and portfolio manager of both of IVA’s portfolios – the IVA International Fund (Trades, Portfolio) and the IVA Worldwide Fund.

As of March 31, 2014 de Vaulx’s Worldwide Fund maintained $9,892.1 million in net assets. Its quarter-end performance data can be seen in the chart below.

This portfolio is utilized to seek long-term growth of capital through investing in various securities and asset classes from markets across the world, including the United States.

De Vaulx’s International Fund, which has been around since 2008, holds $3,548.6 million in assets, and its quarter-end performance can be seen in the chart below.

This fund is utilized to seek long-term growth of capital by investing in various securities and asset classes from stock markets throughout the world.

As of the close of the first quarter de Vaulx’s IVA Worldwide Fund boasts 98 stocks, buying no new stocks and selling out of four during the past quarter. This portfolio is valued at $5.09 billion and maintains a quarter over quarter turnover ratio of 2%. The following five companies are his five largest stock positions and make up for over 25% of his entire portfolio.

  1. Astellas Pharma (TSE:4503): de Vaulx holds on to 27,078,000 shares of Japan-based Astellas Pharma, representing 6.3% of his portfolio. The guru maintained the same position over the past quarter. Check out more information on de Vaulx’s holding of Astellas Pharma here.
  2. Nestle SA (XSWX:NESN): Charles de Vaulx (Trades, Portfolio) holds on to 4,220,716 shares of Nestle SA, representing 6.2% of his portfolio. The guru has held the same position since the third quarter of 2013. Check out more information on de Vaulx’s holding of Nestle here.
  3. Devon Energy Corp (DVN): The guru holds on to 4,097,287 shares of the company’s stock, representing 5.4% of his total assets managed as well as 1.01% of the company’s shares outstanding. The guru has maintained this position since the third quarter of 2014. Check out more information on de Vaulx’s holding of Devon Energy here.
  4. Berkshire Hathaway (BRK.A): The guru holds on to 1,339 shares of Berkshire Hathaway, representing 4.9% of his total portfolio. The guru last altered his holdings in BRK.A during the third quarter of 2013, and since then the price per share is trading up about 10.1%. Check out more information on the guru’s holding of Berkshire Hathaway here.
  5. Oracle Corporation (ORCL): Charles de Vaulx (Trades, Portfolio) holds on to 4,975,822 shares of Oracle, representing 4% of his portfolio and 0.11% of the company’s shares outstanding. Over the past quarter, de Vaulx cut his holdings by -12.52%, and since then the price per share has increased 9.8%. Check out more information on de Vaulx’s holding of Oracle here.

In conclusion, we have a lot to learn from IVA’s star chief investment officer and portfolio manager. Through looking at Charles de Vaulx (Trades, Portfolio)’s combination of international and U.S.-domestic stocks, investors who are looking to expand internationally are given an excellent example and reference point.

If you cannot see Charles de Vaulx (Trades, Portfolio)’s portfolio, you might not have the GuruFocus Global Membership. Try a free Global 7-day trial here!


Rating: 5.0/5 (1 vote)

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Comments

klausbella
Klausbella premium member - 2 months ago

His performance against the S&P is below par. Why do you quote him?

ChrisLong3
ChrisLong3 - 1 month ago

When you invest, you take certain risks. With insured bank investments you face inflation risk. With investments that aren't insured, such as stocks, bonds, and mutual funds, you face the risk that you might lose money, which can happen if the price falls and you sell for less than you paid to buy. Anyway, you must be ready for any unexpected turn and have some extra money. In any case use payday loan company that provides helpful solutions to many financial problems.

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