First Eagle’s Kimball Brooker Provides Global Value Stock Picks

By on May 25, 2012

Kimball Brooker - First Eagle GlobalFirst Eagle funds are known for scouring the world in search of value. Kimball Brooker is the portfolio manager of First Eagle’s Global, Overseas and U. S. Value funds, and was interviewed on CNBC yesterday.

When asked what region of the world he was finding value, Brooker said the Global fund’s holdings of U. S. domiciled companies had been rising gradually.

The First Eagle Global fund has 5 percent of its assets in gold bullion. Brooker said this didn’t mean they were bullish on gold, but held it as “a potential hedge against currency debasement or fractures to the monetary architecture we all operate under.”

Cisco (CSCO) and Microsoft (MSFT) are among the top holdings in the fund. Brooker said they never expected to own those types of companies, because during the internet and telecom bubble they were valued at over 100 times earnings. Since that time the operations of the businesses have grown and remain very profitable and they were able to buy them at single-digit multiples to operating earnings, according to Brooker.

First Eagle Global Stock PicksBrooker said at First Eagle they don’t stay away from certain sectors of the market, but focus on the quality of the business and whether or not they can buy it with an appropriate margin of safety.

Brooker commented on their top U. S. pick which is Bank of New York (BK). He said it founded in the late 18th century by Alexander Hamilton. BK derives 80% of its business from fee-oriented operations, which include asset servicing businesses, custody and clearing, and don’t have a lot to do with banking according to Brooker. He added that most people don’t realize that BK is one of the largest asset management companies in the world. Brooker said BK is number one and number two in the businesses they compete in, allowing them to generate very attractive returns on tangible capital, even now. Brooker said in this low interest rate environment BK has been suffering because of low net interest margins and money market fee waivers they’ve extended to their customers. Brooker estimates the $2.00 earned by BK this year is probably the bottom in earnings for the company and it trades at a discount to its intrinsic value.

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