- Mike Trigg's WCM Focused International Growth Fund is one of the best-performing large-cap international stock funds of the last five years.
- Trigg says that's because a lot of international funds stay close to benchmarks that underweight high-growth sectors and overly conservative approaches.
- The nine-year-old fund has also handily beaten its benchmark since its inception.
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Boiled down to its essence, Mike Trigg's approach to growth investing outside the US is the same way he would invest inside the country.
Owning US growth stocks has been an enormously successful strategy for more than a decade, so that might not sound like much of an innovation. But it's been enough set him apart.
"The universe for true growth investing outside the US is a lot smaller than it is in the US," the WCM mutual fund manager told Business Insider in an exclusive interview. "Our companies in that area are still largely underrepresented in the broad-based international benchmarks."
That is, Trigg argues that global indexes tend to have more "old stodgy outsourcing businesses, slow growing big pharma" in their tech and healthcare sectors than a US benchmark like the S&P 500, which can invest in the hottest companies coming out of Silicon Valley or Cambridge.
Trigg is trying to do something different at WCM's Focused International Growth Fund, which he's co-managed since its inception in May 2011. Straying further from his benchmarks, he's taken the fund into the top 10 among diversified large-company global stock funds, according to rankings by Kiplinger over the past three years and five years.
Since the fund's inception, it's more than doubled investors' money by hauling in a return of 143.8% as of Tuesday. An iShares ETF tracking its benchmark, the MSCI All-World Country Index ex-US has an adjusted return of 31.5% over that period.
WCM, which had $58 billion in assets under management at midyear, invests in companies with big competitive moats and a strong culture that can contribute to their performance for years. Trigg told Business Insider about three high-growth areas where he diverges from his benchmark and competition, and how he invests in each.
Trigg bought Latin American e-commerce company MercadoLibre this spring and made it the largest position in his fund based on its dominant position in a market with a ton of potential for expansion.
"The rates of e-commerce penetration in Latin America are some of the lowest in the world," he said.
But one of his key themes in consumer-focused investing is in pure luxury companies, something he said is actually easier to find outside the US. Major examples for him include LVMH and Ferrari along with Pernod Ricard.
"Those companies are kind of great plays on the rising middle-class, rising incomes around the world," he said. "People get wealthy, they want to purchase things."
But when those companies start to look outside of a luxury market, it's a deal breaker for Trigg.
"We tend to get behind businesses that have the highest price points in their categories because that means the brand is the most aspirational and has the longest duration of growth," he said. "If companies start to go downmarket, start to experiment with lower price products, that's a big warning sign that that moat is no longer going to grow."
He also says Canadian athleisure company Lululemon will benefit from the ways the coronavirus pandemic has reshaped demand for clothing and from its bond with consumers. He made it one of his largest positions in January.
"They understand women better than anybody else, particularly companies like Nike and Adidas," he said. Trigg says he's also intrigued by the company's purchase of Mirror, a company that sells an internet-enabled mirror that lets users participate in online exercise classes.
"There's only one Silicon Valley in the world," Trigg says — but he's quick to add that in metaphorical terms, that might not always be true. He says the US-China trade divide and the "anti-globalization" theme are going to create a lot of new investment opportunities, and when it comes to China, that means new tech companies.
"What you're going to see is the duplication of technology standards and also semiconductor supply chains," he said.
That would mean new business for major companies like manufacturer Taiwan Semiconductor and equipment maker ASML. He also owns a stake in Dutch payment services company Adyen.
"It's a nice backdoor picks and shovels way to play those companies that are super disruptive," Trigg said. "The runway for a company like Adyen is really long, because they're the payments enabler, frankly for kind of a who's who of tech. … As those companies do well, Adyen does well."
Trigg says he's also juiced his returns in healthcare with an eye on China.
"We own a number of life science tools companies that sell into areas like healthcare, pharmaceutical manufacturing in countries like China," he said. "China continuing to go out alone and try to diversify its economy, I think, is a really positive thing from an investment point of view, where the risk is going to be around geopolitical tensions."
He's also bullish on Swiss multinational Lonza based on its role in drug manufacturing and its vital expertise.
"Drugs are getting more and more difficult to produce. They're getting more personalized. The challenges around manufacturing complex biologics, they're only growing," he said. "They're the world leader in that space."
He said Lonza's growing importance reminds him of the position Taiwan Semiconductor was in 15 years ago. Its stock is up about 800% over that time.
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