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Monthly Update: International Fund November 2014

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International Fund November Monthly Report

The Forager International Shares Fund returned 2.4% in November, mainly thanks to a depreciating Australian dollar. The benchmark MSCI ACW IMIrose 4.5% during the month.

The Fund’s gains were limited by its investments in oil services companies, where stock prices extended their dramatic declines since June. The price of Brent Crude Oil fell 19% and our basket of oil services stocks between 3% and 13%.

Relationships between European regulators and Google (NASDAQ:GOOGL) continued to sour. Europe’s privacy watchdogs aren’t happy with the internet search giant’s implementation of its “right to be forgotten” rules and now want Google to extend the implementation of the rules to its US site,

Separately, four German politicians sent a letter to the European Commission arguing that Google may need to be split up if it doesn’t stop prioritising search results in favour of its own products. It seems to be mostly political posturing for the moment but there is significant animosity towards the company in Europe, especially amongst German politicians and regulators.

If it meant the search engine part of the business had to start paying dividends, busting Google up might be the best thing that could happen to shareholders. Co-founder and CEO Larry Page gave wide-ranging interviews with the Financial Times and Fortune during the month where he expanded on his vision for the company.

Page is of the opinion that there aren’t enough people trying to fix the world’s problems. “The societal goal is our primary goal”, he says, with energy and old age two of the many issues that Page thinks Google can fix with its prodigious financial resources.

While Page’s ambitions are laudable and likely to be good for the world, it makes it extremely difficult to value what is essentially a venture capital stock. Our preference would be that he pursued his dreams with his own share of the profits, and distributed the remainder to the rest of us to do as we see fit.

Google’s share price fell 3.3% in a month where the tech-heavy NASDAQ index rose 3.5%. It would seem fellow shareholders are sharing our concerns.

After sitting on our wish list for a year, the brief but sharp October downturn gave the Fund its chance to acquire shares in Rosenbauer International AG (WBAG:ROS). This small family-controlled Austrian company is the leading producer of firefighting vehicles, with a global market share of almost 20%. Its offering ranges from municipal trucks that fight neighbourhood fires through to specialised airport firefighting vehicles that can go for up to €1m each.

Industry-wide sales of fire trucks to developed-world markets is yet to recover fully from the GFC-induced hit to local government budgets. This will recover as old trucks pass their used-by date and need replacing. Rosenbauer has been largely insulated from wider industry pain by massive orders from Saudi Arabia over the past few years, but these should be considered largely one-off. Balancing the tailwinds and headwinds developing, the Fund has acquired a good business at a reasonable price.

Rosenbauer recently announced decent third-quarter results and an uptick in the order backlog, now equal to about one year’s worth of sales. The stock has risen 21% since the Fund’s purchase and makes up 2.5% of the portfolio. For more insight into this likely long-term holding, see Gareth’s Rosenbauer presentation from Forager’s recent investor day.

If you were unable to attend the event or wish to refresh your memory, the presentations are now available on the Bristlemouth blog or our YouTube channel.