A Regional Discussion

“You have 60% of your equities invested in the US. Is there that much potential in the U.S. dollar?” This was one of the questions asked by one of our clients on our current equity allocation. What many people forget is that most of the companies in Gutmann's equity portfolio operate internationally. This applies to both production and sales markets. For us in the Chief Investment Office, currency is therefore not an issue in stock selection. 

Gutmann is not an equity manager by region. We don't look at the world map and say, “The economic situation in Europe is deteriorating, so we're reducing our positions in Europe and increasing them in the U.S.” That's not our approach. I'm generally not a fan of the philosophy of looking at regions. After all, we are all part of a global village. At least a Western village. 

From India to Finland 

Suppose I swallowed a Swiss company's drug manufactured in India and spent time on a video game from a Finnish start-up on a mobile device from a U.S. company. All whilst drinking a reddish-colored bitter beverage from an Italian liquor company. The non-alcoholic version, of course - because of the medication. And because I like it all so much, I decide to put together a portfolio of these three stocks. Only three, because the Finns are not yet on the stock exchange and India is only the location of the production facility of the Swiss.

Should the region and currency view now be my top concern and most important variable? Am I now invested one-third each in Swiss francs, U.S. dollars and euros? Statistically, yes. But is such an evaluation really relevant? I think not. 

And yet somehow it is. There is a benefit to being invested in different currency areas, political spheres, cultures and economic regions. Yes, these three companies sell their products around the world and have production bases in different locations. And it doesn't just happen in the Western world, China is certainly involved. But the company headquarters and the cultural background of the management will definitely be different. Diversity is a good thing.

We always view our Gutmann equity portfolios through the lens of individual companies. Nevertheless, we also consider regions, economic areas and currency influences. This does not change our basic orientation, nor is it inconsistent. We sometimes must endure the complexity of having two contradictory thoughts in our heads at the same time. 

Investing is simple and complex at the same time. But perhaps that is precisely why the Gutmann perspective exists.