Is There Value in TGVAX?

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Performance evaluation of the Thornburg International Value Fund

Except for the trailing-one-month period, the Thornburg International Value Fund Class A (TGVAX) has been a below average performer. Year-to-date as of August’s end 2016, the fund was among the bottom three among its 12 peers under review, while for the one-year period, the fund was dead last.

We’ve graphed TGVAX’s performance against the iShares MSCI ACWI ex U.S. ETF (ACWX) and the iShares MSCI EAFE ETF (EFA). Let’s look at what’s contributed to its poor performance so far in 2016.

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Contributions to returns

Financials are mainly responsible for the fund’s underperformance so far in 2016. Intesa Sanpaolo and Aviva (AV) have pummeled the sector with contributions from UBS Group (UBS), Lloyds Banking Group (LYG), and ING Groep (ING), hurting the sector as well.

Healthcare stocks have also been a bane to the fund. Novo Nordisk (NVO), Roche Holding (RHHBY), and Novartis (NVS) have hindered the sector’s performance. GlaxoSmithKline (GSK) has made a small positive contribution, but it’s been more or less insignificant. Telecommunications services, which form just 7% of the fund’s portfolio, have been sizable negative contributors as well, primarily due to Telecom Italia (TI).

Among the fund’s positive contributors, the consumer staples sector has done the most to help TGVAX to reduce its negative returns. Kweichow Moutai Company has towered above all other positive contributors from the sector such as Nestlé (NSRGY) and Heineken (HEINY). The materials sector has also done much to reduce overall negative contributions to the fund. Freeport-McMoRan (FCX) is the main reason that the sector has done well. BHP Billiton (BHP) has also been an important positive contributor.

Meanwhile, the technology sector has been led by Tencent Holdings (TCEHY). MasterCard (MA), and NXP Semiconductors (NXPI). TOTAL (TOT) and ExxonMobil (XOM) have fueled gains in the energy sector.

Investor takeaway

The value focus of TGVAX is a different proposition from most of the other funds under review, which tend to focus on growth stocks. However, its high portfolio turnover seems to be a hindrance in terms of providing value to investors. Several stocks that we’ve discussed in this article aren’t even part of its portfolio anymore. Existing investors could do well to invest in other funds focused on international equities if they haven’t already done so.

Let’s move on to the Vanguard International Growth Fund Investor Shares (VWIGX).

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