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Inflation Is David Winters' No. 1 Concern

March 26, 2013 | About:

Barron's recently interviewed value investor David Winters.

You can count him among the group of value investing luminaries that are concerned that global Central Bank actions are setting us up for a serious inflation problem.

In the Barron's interview Winters provides us with some investment ideas that have the pricing power to thrive in an inflationary world:

David Winters' portfolio holdings change over time, but not his investing approach. The Wintergreen Fund (WGRNX), which he launched in 2005, holds about 30 stocks, with the 10 largest positions accounting for half of its assets.

A global value investor who preaches patience, Winters, 50, is a big believer in the view that thorough stock research provides an edge over the competition. That isn't surprising, considering that he worked for nearly two decades at Mutual Series, the vaunted value shop run by Michael Price and the late Max Heine.

Wintergreen has an annual total return of 7.36% since inception, placing it in the top 12% of its Morningstar peer group. Winters, who is based in New Jersey, but travels frequently to visit companies, journeyed to Manhattan recently for an interview at Barron's offices. The topics ranged from jewelry and watches to some of the stocks he likes. For specifics, read on.Barron's : We'll get to some of your holdings shortly, but let's start with your macro view. What concerns you?

Winters: We are very concerned about inflation, particularly the amount of money that has been printed in the West and Japan as the global economy recovers. We already see that food prices have gone up, and so one of the issues that almost no one is talking about is inflation risk.

You have been worried about that for a long time.

Yes. Our timing hasn't been perfect, but we really are focused on trying to find businesses that have pricing power. Even if there is currency depreciation, the businesses that we are investing in should do just fine with inflation. The corollary of it is that we are concerned that, at some point, interest rates go up. Rates have gone one way forever, and at some point they will reverse. So we want to own businesses that are already borrowing long-term and have the ability to do well, even in a higher interest-rate environment. So there are two elephants in the room that no one wants to talk about: inflation and higher rates.

Read the full interview here.

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