A stock picker's view of the world

Many investors and commentators are focused on current events, such as the price of oil and hurricanes in the United States, and wondering what it means for their investments.

Thursday, September 29th 2005, 6:57AM

However Boston-based MFS, who manage money in New Zealand for Russell Investments and ING, isn’t taking much notice of these “near-term events”.

Rather, as vice president Ben Kottler said, the focus for MFS as fund manager is to buy good quality stocks that have long-term growth characteristics.

He says MFS is a bottom-up stock picker and not that interested in the near-term events in its search for companies to invest in.

As a stock picker MFS doesn’t pay much attention to sectors or geographical split of its portfolio.

However a quick look at its current holdings shows it is significantly underweight in the United States market and over weight in the emerging markets.

Kottler says the reason for this is that many companies in the United States are quite expensive and it can find better value elsewhere.

Kottler says MFS is also interested in companies returning capital to shareholders.

One of the big investment issues at the moment is that plenty of companies have built up strong balance sheets with lots of cash in them and this money is starting to be returned to investors instead of being reinvested by the companies.

In some ways United States companies are starting to do what New Zealand companies have done for years and return capital to shareholders.

Kottler also expressed interesting views on the much-debated subject of corporate governance.

He says the debate has been centered on the question: Should corporate governance be used as a screen when looking at prospective companies or should it just be a factor to take into account?

If it is used as screen it becomes a sort of test a company has to pass before it is considered for investment. Kottler is of the view that it should just be an issue that is taken into account.

He says it is possible for companies to have what is considered poor corporate governance, but still look after its investors.

He says there is no direct correlation between things like the number of independent directors on a board and performance.

« Advisers must take responsibility for New Zealanders’ underinsurance

Sovereign takes regulation bull by the horns »

Special Offers