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Motley Fool Champion Funds

"All-Star Fund Manager: Bernie Horn"

December 2005

As manager for the Polaris Global Value Fund, Mr. Horn invests heavily in the funds he manages and beyond that, he’s a stock picker devoted to a commonsense approach to asset allocation. The Polaris Global Value Fund is hardly an international-only affair; at the end of December 2005, roughly 40% of the fund’s assets were devoted to U.S. equities. The Q&A with Fund Manager Bernard Horn describes asset allocation and buy decisions, and the resulting positive effects on the Fund. 

Morningstar

"Polaris Global Value Has Taken Advantage Of The Possibilities"

November 16, 2005

Bernard Horn and his investment team at the Polaris Global Value Fund view all the world’s stocks as one big pool from which to choose. They do keep in mind a company’s location, particularly if it resides in an emerging market. But Fund management allows the overall country and regional allocations to fall wherever they may, depending on which 75 or so companies seem most attractive after their research. The approach uses quantitative screens to narrow the field, and then it uses fundamental analysis combined with insights about overarching economic trends.n and buy decisions, and the resulting positive effects on the Fund. 

The Fund’s healthy allocation of smaller stocks -- which have historically outperformed – have given it a leg up on rivals in the past few years in this wide-ranging category that tends to focus more on larger securities.

Motley Fool Champion Funds

"Fund of the Month: Polaris Global Value"

November 2005

To view the complete text article, click here

The Polaris Global Value is run by Bernie Horn, a manager who believes in both his investing process and in the necessity of allocating assets worldwide. The Fund's performance has proved admirable, handily outperforming many of its peers since inception. The Fund's standard deviation, a gauge of how far performance has swung relative to its mean, has frequently been lower than that of the S&P.

Mr. Horn hews to a stock-picking process that seeks to provide a measure of mitigating risk. Namely, he likes discounted but high-quality stocks. A key part of the Fund's stock-selection strategy involves quantitative screening, a process that whittles down the vast universe of stocks to a reasonable, not to mention reasonably priced, number. From there, Mr. Horn and his team use bottom-up, fundamental analysis to make their picks, homing in on (among other things) balance sheets, profitability, and the quality of a company's management team as they go about the business of assembling the Fund's portfolio.

The Wall Street Journal

"SmartMoney Fund Screen: Global Funds"

August 23, 2005

MSN Money

"Company Focus: Stocks That Will Ride Europe’s Next Boom"

August 17, 2005

Bernie Horn, manager of the Polaris Global Value Fund (PGVFX), discussed international stocks that are likely to thrive in the near future.  He points to ENI, an Italian energy company, which has a lot of refining capacity – an advantage since tight production capacity has driven up refining margins.

Another pick has been Dublin, Ireland-based CRH, which supplies many of the basic building blocks of construction, like cement, asphalt, glass stone and gravel.  The company has low-cost sources for raw materials, says Mr. Horn, noting that the company also has a knack for growing through acquisition.

Boomer Market Advisor
Should The Falling Dollar Matter?
May 2005

(Byline Highlights -- Author Bernard R. Horn Jr.)

• Global or international investments should be made to achieve diversification around the world, not to serve as a short-term currency play. Over long periods of time, the impact that currency gains and losses have on total equity returns is immaterial (approximately 0.1% over the last 10 or more years).
  
• To properly assess the benefits of global diversification, investors must review long-term data that has weathered different market cycles.
  
• In comparing returns, non-U.S. investments outperformed U.S. investments for most of the 60s, 70s and 80s as defined by the S&P 500 and MSCI-EAFE Indices, while U.S. stocks outperformed in the 1990s. In the future investors will likely experience periods when U.S. stocks outperform international equities and vice versa. However, over time, returns of broad stock indexes have been similar.
  
• Broad investment values now exist in many areas of the world. In response to tough global competition, companies worldwide are aggressively restructuring. In many cases, foreign stocks now have significantly lower price/cash earnings (P/CE) ratios than their U.S. counterparts. Price to cash earnings ratio is the value of a company's stock price relative to its cash earnings.

“Investment Outlook: Prognosticators Offered Their Forecasts For 2005”

January 10, 2005

Investors looking for higher returns in 2005 would be smart to look outside the United States, according to Bernie Horn, president and portfolio manager of Polaris Capital Management.  A manager who identifies companies that he feels are undervalued relative to their peers, Mr. Horn believes returns in the U.S. will continue to be modest and that outperformance remains within the international arena.  He outlines the price to cash earnings (P/CE) basis, where non-U.S. companies are trading at 8.6x compared with 12.4x for U.S. companies.  The disparity in multiples is huge, according to Mr. Horn, partially due the 1990s market activity.

The New York Times

“For Value Funds, A Tough Act To Follow”

January 9, 2005

Bernard Horn Jr., who runs the Polaris Global Value Fund in Boston, notes domestic blue-chip stocks now trade at a 50% premium to their foreign equivalents on a price-to-cash earnings (P/CE) basis.  Accordingly, the firm’s management team has cut Polaris’ portfolio exposure in domestic stocks to 36%.  Overseas, Polaris has bought shares of George Wimpey P.L.C., a British homebuilder whose P/CE multiple of six is half that of American competitors, Mr. Horn said.  The fund is also accumulating shares of Japanese utilities like Kansai Electric Power and Tokyo Electric Power that are finally “getting religion” by curbing capital spending to deliver free cash flow to shareholders.

Bloomberg Television

“Morning Call: Bernie Horn Transcript”

January 3, 2005

Funds invested overseas are positioned to do well in 2005, according to Bernie Horn, president of Polaris Capital Management.  In describing Polaris’ investment strategy, Mr. Horn and the fund management team look for companies that have good free cash flow and that can be bought at a good price.  Mr. Horn and his team are looking overseas to areas of the world that are growing rapidly – noting that the job market is much stronger in low-cost countries. Outside the U.S., Polaris likes Japanese utility companies including Tokyo Electric Power, Swedish air-bag maker AutoLiv, and an old favorite, German auto parts maker Continental AG.

Financial Planning

“Global Goodies”

January 2005

(Byline Highlights -- Author Bernard R. Horn Jr.)

• To properly assess the benefits of international diversification, investors must review long-term data that has weathered different market cycles.  Consider an historical market perspective, with data gleaned from January 1969 to June 2004 (414 monthly observations).  This data illustrates that the beta (measure of volatility) of the MSCI – EAFE Index versus the S&P 500 Index is 0.59 when measured using monthly returns from this 35-year period.  Measured this way the benefits of international diversification still exist. 

• In comparing returns, non-U.S. investments outperformed U.S. investments for most of the 60s, 70s and 80s as defined by the S&P 500 and MSCI-EAFE Index, while U.S. stocks outperformed in the 1990s.  Investors should experience periods when U.S. stocks outperform international equities and vice versa.    The weak U.S. dollar has also advanced foreign stocks held by U.S. investors – all other things being equal foreign stocks become more valuable as the underlying foreign currencies appreciate. 

• CHEAP STOCK PICKS -The global economy is reawakening as companies shed excess financial baggage in favor of efficient environments.  Following lackluster stock performance coupled with corporate restructuring, foreign stocks now have substantially lower price/cash earnings (P/CE) ratios than U.S. counterparts.