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WALL STREET, CALIFORNIA | MANAGER'S FORUM

Global Conqueror : SoGen International's Helmsman Scans the World for Value Without Regard to Market Timing or Sector and Regional Trends

November 12, 1996

Since 1979, Jean-Marie Eveillard has steered the SoGen International Fund--an affiliate of the French bank Societe Generale--to returns that have outstripped those of the Standard & Poor's 500, yet with risk levels below those of most other global funds. The fund, accordingly, has ballooned from $15 million to $3.5 billion.

His current allocation mix is about 33% foreign stocks, 22% U.S. stocks, 15% bonds (domestic and foreign), 7% gold-related securities and 23% cash. Eveillard, 56, also manages the SoGen Overseas and SoGen Gold funds. He is a native of Poitiers, France. He spoke in his New York office with Times staff writer Thomas S. Mulligan.

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Times: You operate with very few restrictions, investing in stocks, bonds, metals and sometimes exotic assets, and you look over the entire globe. With a playing field that large, how do you focus?

Eveillard: It's an approach that might be regarded as haphazard. Every day, my five associates' desks and mine are inundated with a tremendous amount of material, from sources we have accumulated around the world. The investment process in essence is for us to go through that mail. A good chunk of it ends up in the wastebasket very quickly, where it belongs. Some of it ends up in the files. The rest--which is much less than one-third--we decide to investigate further.

Times: You have a reputation for patience.

Eveillard: We hold securities on average for five years. We have a turnover ratio of less than 5% annually. Somebody once said that short-term, the stock market is a voting machine which measures the perceptions of investors, who vote through their purchases of securities, while long-term, it's a weighing machine which weighs realities as opposed to perceptions.

When we make a mistake, which happens regularly, it's not a matter of having misread market psychology. It's because we've made the wrong medium-term assessment of a particular corporation.

Having a five-year horizon means we don't spend time trying to figure out whether the German stock market over the next six or 12 months is likely to rise more or less than the Japanese stock market. Investors who operate from a top-down point of view--who start out by deciding which market they will be in--do spend time trying to figure that one out. We're mostly bottom-up, so we don't worry about it.

On the other hand, I don't think anybody from a global point of view can be entirely bottom-up because, after all, there is a difference between investing in Switzerland and investing in Indonesia.

Times: You have a large cash position, about 23%. Does that mean it's hard for you to find bargains?

Eveillard: We've been on the side of caution for the 18 years that I've run the fund. Sometimes I say to myself, "What's the point of trying to run a fund for all seasons if the sun always shines?" And the sun has been shining over the past 18 years with very few interruptions.

But the caution, maybe it has to do with my European background. Europeans, at least of my generation, tend to be more skeptical than Americans. Maybe it has to do with the fact that my own money's at stake. Other than some emergency money in a money market fund, my entire financial portfolio is invested in the International Fund and the Overseas Fund.

Times: How do you judge prices? Do you have any hard and fast rules?

Eveillard: I believe we belong to the value school. It's a big tent, but in essence the value investor wants to buy for 60 or 65 cents--50 cents if he's really greedy--what he perceives to be worth one dollar today. The idea is that after a year or two if you have to acknowledge that, gee, you made a mistake and what you perceived to be worth a dollar was worth only 50 cents--if you paid only 60 or 65 cents for it, you lose money but not a tremendous amount.

On the other hand, as Warren Buffett said, I'd rather pay a fair price for a good business than a good price for a fair business. If our perception is the business is really good, we're willing to pay more. We own the stock of Pulitzer Publishing, for instance. We're still holding on to it, even though on conventional valuations such as price-to-earnings ratio it looks expensive, because we really like the business, the capacity to generate cash, especially.

Times: You have an eclectic mix among your largest holdings--gold and copper mining, a central bank, heating equipment, hotel management--so you're not really a picker of sectors?

Eveillard: We are not really theme investors, but anybody who looks closely at the portfolio can see that maybe there are a few themes. For instance, for many years, U.S. investors have seen media-related businesses as being better than run-of-the-mill industrial/commercial enterprises--which they are. Accordingly, the prices of those securities have been pushed upwards.

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