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A Frenchman Who Loves Big Macs, Bud Light, and NASCARBy Graham SummersWednesday, October 17, 2007 Let me introduce you to Jean-Marie Eveillard.
Eveillard is a legendary value investor. Between 1979 and 2005, his First Eagle Global Fund (SGENX) showed investors an average annual return of 16%.
These returns alone are enough to place the France-born Eveillard in a rare class of investors. However, it's Eveillard's cautious nature that truly distinguishes him from his peers. From 1979 to 2005, his fund only lost money in two years: 1.3% in 1990 and 0.3% in 1998.
Even more incredible, Eveillard produced gains of 10% a year in 2000, 2001, and 2002, all years in which the market tanked. Simply put, this is a guy who doesn't lose money.
Eveillard retired from managing money in 2005. But he came out of retirement this year when his protégé Charles de Vaulx suddenly resigned in March. And while the First Eagle Global Fund is closed to new investors, we can follow Eveillard's advice simply by looking at his portfolio.
On the surface, I found just what I'd expect. Eveillard has 4% of his portfolio in gold bullion: a classic hedge against the falling dollar. Additionally, Eveillard has 20% of his portfolio in cash: a sign that he doesn't think the market shakeups are totally finished.
And that's when I saw it...
Over 20% of Eveillard's equity portfolio is in consumer staples and consumer discretionary stocks.
An estimated $50 billion worth of U.S. mortgages will reset to higher interest rates this month alone. Many of these will foreclose as monthly mortgage payments jump hundreds of dollars. According to the Homeownership Preservation Foundation (HPF), we're up to one foreclosure for every 704 households in the U.S.
Joe America is going to have serious trouble keeping his house, let alone buying more flat-screen TVs... and yet one of the greatest living investors has put 20% of his equity portfolio into consumer-based stocks.
Eveillard's fund is globally focused, so he owns consumer plays from all over the world. However, his favorite U.S.-based consumer stocks are:
The top three holdings say it all: Eveillard is bullish on junk food, beer, and NASCAR. If you were going to bet on U.S. consumer spending, you couldn't ask for three better businesses to own.
Perhaps the French understand us a little too well.
Good trading,
Graham
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