uploads///Portfolio Breakdown of the TEMIX

Looking at TEMIX’s Portfolio up to November 2015


Dec. 23 2015, Updated 5:03 p.m. ET

Franklin Mutual European Fund

The Franklin Mutual European Fund Class A (TEMIX) “invests at least 80% of its net assets in securities of European companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value).”

What this means is that fund managers look for undervalued securities by arriving at an intrinsic value of that security and seeing whether it is trading below that value. It also invests in merger arbitrage securities and stocks and bonds of distressed companies.

In normal circumstances, fund managers will spread the fund’s assets across companies from at least five different countries. It can also invest up to 20% of its assets in instruments issued by companies located in the United States, the Middle East, emerging markets, and other regions.

The fund’s assets were spread across 78 holdings (stocks, bonds, and currencies) as of September 2015, and it was managing assets worth $3.3 billion as of November’s end.

As of its September portfolio, TEMIX’s equity holdings included Nokia (NOK), Deutsche Telekom (DTEGY), XL Group (XL), and UniCredit (UNCFF). The top ten holdings of the fund made up 23.2% of its assets.

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Historical portfolios

For this analysis, we will be considering holdings as of September 2015, as that is the latest available sectoral breakdown. The holdings post-September reflect the valuation-driven changes to the portfolio, not the actual holdings.

Financials is the biggest sectoral holding of TEMIX, making up over 30% of the fund’s portfolio. A distant second and third are the consumer discretionary and industrials sectors, which form a combined one-quarter of the fund’s assets. Further, the fund holds about one-tenth of its net assets in cash and equivalents.

Some of TEMIX’s sectoral composition is quite different from that of its peers. TEMIX has a large exposure to telecom services stocks. This sets it apart from its peers, some of which have avoided the sector altogether. Also, it’s quite underweight for healthcare sector stocks compared to its peers. Healthcare stocks form just 3% of its assets.

Compared to the portfolio a year ago, the fund’s management has increased its exposure to information technology stocks. Stocks from the sector used to form one-quarter of a percent of the portfolio a year ago, but now they make-up over 2.5%. Meanwhile, industrials and consumer discretionary stocks form less of the portfolio than they did one year ago.

The discretionary, materials, and financials sectors saw their allocations increase in the year, but they now stand reduced from those levels. On the other hand, the consumer staples, healthcare, and telecom services sectors saw reduced exposure in the year but have strengthened since then.

Let’s see how TEMIX has performed YTD up to November 2015 in the next article.


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