Wendler wants investors to think international

Investing

January 01, 1996|By BILL ATKINSON

WILLIAM F. Wendler II believes he knows where the smart money is starting to shift these days.

The 33-year-old senior marketing and client-services officer with Rowe Price-Fleming International Inc. says it's moving into international stocks, and out of domestic companies.

It's not a tidal wave of activity, but in recent months big corporations, pension funds, endowments and foundations have trickled money into European, Latin American and Asian companies.

The reasons are simple. Mr. Wendler and a number of money managers think there's little chance of another run up in U.S. stocks like the one in 1995, so they want to diversify their portfolios.

They also see the U.S. economy losing steam while Europe, Japan and Southeast Asia will be coming on strong over the next five to 10 years. And many overseas stocks have been beaten up, so there are plenty of bargains.

"We are excited," Mr. Wendler says. "It is a good time to be looking abroad. The non-U.S. markets have been laggards, but we're coming on a set of circumstances where we see better returns."

For the past seven years, Mr. Wendler has worked at Rowe Price-Fleming, which has $22 billion under management, and is jointly owned by Baltimore's T. Rowe Price Associates Inc. and the London-based Fleming Group. Prior to that, he spent five years marketing Price 401(k) services to corporations.

Clients he works with include General Motors Corp., Baltimore City, Sprint Corp., Monsanto Co. and Stanford University.

There hasn't been much to cheer about for overseas funds managers.

Japan's economy has been limping along for about four years. Mexico's economy has been shredded by political instability, a plunging peso and recession. And images of rail strikes in France, corruption in Italy and a tight-fisted central bank in Germany haven't encouraged investors.

The problems have been borne out in the markets. Over the past seven years, the S&P 500 has beaten the Morgan Stanley Capital Interna-tional Europe, Australia and Far East Index time and time again, except in 1993 when the international index returned 33 percent.

T. Rowe's international mutual funds have the bruises to prove that business overseas has been tough. Its International Stock Fund, which has made Forbes' honor roll of best mutual funds for the last six years, returned just 0.38 percent for its fiscal year ended Oct. 31, 1995. T. Rowe's Japan Fund returned a negative 12.9 percent; the Latin American Fund returned a negative 37.11 percent; and the New Asia Fund returned a negative 9.70 percent. The big winner was the European Stock Fund, which returned 14.41 percent.

Historically, the performance of these funds has been quite good. The International Stock Fund has had average annual compound returns of 9.87 percent over the past five years; New Asia Fund has returned 13.93 percent, and the European Stock Fund has returned 9.26 percent.

The Japan Fund, launched in December 1991, is up 2.57 percent, while the Latin American Fund is down 20.95 percent since its inception in December 1993.

Mr. Wendler says now is the time to buy because many of these economies are showing signs of life. A red and blue chart he produces compares the S&P 500 with the Morgan Stanley Capital International Europe, Australia and Far East Index. It shows that during the past 15-year and 10-year periods, returns from overseas investments have either greatly outpaced, or at the very worst, equaled the S&P 500.

"If you restrict your investment to the U.S. stock market, you not only restrict it to the smallest part of the opportunity set, but it is the slower growing portion," Mr. Wendler says.

He has other reasons to believe that international investments will pay off. Japan is on verge of climbing out its recession, and companies such as Sony Corp., Hitachi AIC Inc. and Canon Inc. will benefit as the world's economy expands.

Longer term, Latin America still looks promising, despite Mexico's problems. And China as well as other Asian countries such as Korea, Thailand, Malaysia and Singapore should continue to grow briskly.

"They are high-growth economies," Mr. Wendler says. "It is our favorite part of the world longer term, bar none."

He says, however, that "there are lots of very well run international companies."

Besides Sony, Canon and Hitachi, he likes Germany's Bilfinger & Berger, a construction and civil engineering company; Mannesmann, a cellular telephone manufacturing firm; and Elsevier, a publishing company in the Netherlands that uses new media technology.

"We think international will have its day," Mr. Wendler says. "We think it is time to make up some ground."

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