Morningstar Advisor - August/September 2012 - (Page 62)

Undiscovered Manager Robert Gardiner universes limited to either the United States or international—one or the other, but not both. “I view a domestic fund as sort of like setting up a Texas fund. And then the international fund is like investing in 49 states, excluding California,” he says. The screening process for international and domestic stocks is extremely methodical. Harkening back to Gardiner’s own youth working in the back room at Wasatch, his daughter has the job of running each week’s batch of stock screens. The screens are broken out into regions. For example, one week they will cover particular U.S. states and foreign 05/ 11 countries, with that pattern rotating over the course of a year. Screens also cover industries on a rotating basis, so nothing gets overlooked. “Names pop up off the screen,” Gardiner says. “If we think it looks interesting, it goes on a hot list for one of the analysts or one of the PMs to look at. If it’s super interesting, it goes on a ‘red hot’ list.” The next step is what Gardiner and Walker dub the “company touch”—a phone call or visit with a company’s management. “We’ll go visit the company, see it, hear the story, see if we trust the guy,” Gardiner says. Small, Growing, and Strong investments such as Concord, which was eventually acquired by First Data. These days, Grandeur Peak is looking to opportunities in the online payment arena. The fund managers see plenty of potential there, as more retailers around the world bring their wares online. Gardiner likes the way Wirecard expanded throughout Europe and is now making inroads in Asia. Another similar holding is Japan-based GMO Payment Gateway. In addition to Gardiner and Walker, the Grandeur Peak team includes four analysts. One, Amy Sunderland, is based in Hong Kong. She, like several other members of the team, is a Wasatch veteran. Gardiner says that having an analyst on the ground in Asia has helped the firm do a more rigorous analysis of emergingmarkets companies. Gardiner maintains that many U.S. investors have a skewed view of overseas risk and believe foreign investing to be a swamp of corruption and lacking in transparency. On the contrary, he sees examples of better governance than is sometimes found stateside and a degree of transparency that is common in U.S.-listed names. Advisor Dominick Vetrana, of Chicago’s Fountainhead Financial, appreciates the opportunities that Gardiner and Walker are uncovering. “I use it for micro-cap opportunistic investing, globally. Right now, it’s probably my main small-cap exposure.” Vetrana says that Gardiner brings more to the process than his stock-analysis skills. “Robert has a passion for the business,” he says. “If you get him talking about an individual stock, he lights up. That’s something you can’t replicate.” K Kate Stalter is a freelance financial journalist. Grandeur Peak Global Opportunities GPGOX $15K 10 MSCI EAFE NR USD 01/12 02/12 03/12 04/12 05/12 06/12 07/12 Category World Stock Morningstar Rating — Minimum Investment $2,000 Data as of June 30, 2012 05/ 07 05/ 08 05/ 09 Expense Ratio (%) 1.75 6-Mo Total Rtn (%) 11.56 6-Mo TR % Rank Cat 4 05/ 10 05/ 11 Grandeur Peak International Opportunities GPIOX $15K 10 MSCI EAFE NR USD 01/12 02/12 03/12 04/12 05/12 06/12 07/12 Category Foreign Small/Mid Growth Morningstar Rating — Minimum Investment $2,000 Data as of June 30, 2012 05/ 07 05/ 08 05/ 09 Expense Ratio (%) 1.75 6-Mo Total Rtn (%) 11.92 6-Mo TR % Rank Cat 3 05/ 10 05/ 11 Grandeur Peak has trademarked a phrase to describe what it’s looking for in a company: Best In Class Growth. Gardiner says that the 05/ 11 approach is simple. “We’re trying to find a really good small company that has good corporate governance, that has head room to grow, has a sustainable competitive advantage, and a good business model. We’re trying to find those companies before everybody else finds them.” Walker cites a German online transaction processor, Wirecard, as an example of a company that meets his and Gardiner’s criteria. The electronic-payment space is an area in which Wasatch enjoyed success with 62 Morningstar Advisor August/September 2012

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2012

Morningstar Advisor - August/September 2012
Contents
Contributors
Letter From the Editor
How Much of the Behavior Gap Is Your Fault?
What’s Your View of the Muni-Bond Market?
A Balanced Life
How to Get to Know EMMA
A Strong, Robust Fund Business
Dividend Investing Abroad
Four Picks for the Present
Investment Briefs
Fund Expenses Through the Decades
Autos on Comeback Track
Lessons From the Muni-Bond Rebound
Municipal-Bond Landscape Shifts
Municipal Bonds 101
A Tale of Two Cities
Unraveling the Mysteries of Money
Small Companies Mean the World to Him
The Chinese Art Market and the Origin of Bubbles
The Myth of the Dumb Investor
Stocks That Can Stand the Heat
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The War on Savers

Morningstar Advisor - August/September 2012