Jean-Marie Eveillard Interview with FA Magazine

Thanks to Dah Hui Lau's blog (aka David) for the following reference to a Jean-Marie Eveillard interview in the August edition of Financial Advisor magazine. Jean-Marie Eveillard is a respected value manager who runs First Eagle Funds. It's worth reading about his thoughts on diverse topics, many of which are quite pertinent right now. I'll list some of the items I found insightful below (for some reason I can't seem to copy the text from that PDF document).

• He isn't so worried about the current boom except for the fact that it is a credit boom. He says credit booms end with credit busts.
• As is the case with most value managers, he says private equity competes with him and makes it harder to find opportunities. Warren Buffett has remarked on this quite often.
• Although this might be a bit biased given that he is a mutual fund manager, he says that hedge funds are basically money-making schemes for the managers. He wonders what's the difference between a hedge fund and an investor leveraging a mutual fund. I think he is being simplistic here since hedge funds undertake strategies that mutual funds don't, but his point about compensation is true. I think hedge funds don't impact most investors directly since most of us aren't wealthy enough to be eligible to use them. However, many pension funds and other institutional funds will suffer with hedge funds.
• He has held gold or gold stocks for years but is starting to question whether they have hit a peak. This is something I also wonder about. I profitted from gold a couple of years ago, and I took a new position in Harmony (HMY) recently, but I wonder if the US$700ish peak in 2006 was a long-term peak or not. Unlike the past, the big risk is that gold will go down with the broad equity markets.
• Two contrarian areas he likes are US newspapers (like New York Times (NYT)) and Japanese Industrials. I have been tracking NYT and I like it as a contrarian bet. Jean-Marie says it is a high quality asset that will last a long time, and has room for operating margin improvement. I personally dn't see a big upside so I'm not investing in NYT for the time being. As far as Japan is concerned, I like that whole space.
• He also mentions a Swiss holding company that he likes: Pargesa. I'm not sure if this is a good buy now or not. Often some holdings by managers were obtained at lower valuations and it may not be appropriate for new investors to buy (for example, Coca-Cola or Washington Post, which is owned by Buffett, were great when Buffett bought it years ago but probably aren't great right now.)
• Supposedly Graham-style discounts are present in Japan and South Korea right now. He prefers to use these countries to play the China boom because he doesn't trust the Chinese accounting--a view I also share. I am bullish on Japan and think it is a perfect contrarian opportunity right now. Japan is not easy because valuations look high (highest P/E in the world), and it's hard to get much news (big Japanese companies have english websites but newspaper stories are hard to find unless you pay quite a bit).
• A Japanese company that he likes is a sensor maker called Keyence (TSE: 6861) . Keyence makes sensors for factory automation. He thinks it is worth Yen 34,000. The stock trades at Y25,690 today so you are looking at a 30% upside. According to Reuters.com, trailing P/E is 22 and forward P/Es are: FY08: 20.39, FY09: 18.59. Price-to-book is around 3. The stock has gone up quite a bit since 2002 and is starting to come down. I have to read up on the company but my concern is whether this company is sensitive to a slowdown. If it is, a P/E of 20 is going to get cut down. Most analysts have a HOLD rating (good from a contrarian point of view :) ). (BTW, Reuters.com is a good site for Japanese stock quote info. Use ".t" as the Tokyo Stock Exchange suffix (eg. 6861.t)).
• He also likes the Japanese pneumatic maker, SMC. I have seen SMC equipment but never even knew it was Japanese. He says this may be near a cyclical peak so one needs to be careful. I'm going to skip this company for now since I'm bearish on the markets and the US economy, which will spill over to the rest of the world IMO.