An Interview with Vivian Lewis, Editor of Global Investing

This week, I’m pleased to bring you the first in a new series of interviews with the expert contributors to The Dick Davis Digests. Our first contributor is Vivian Lewis, the editor of Global Investing. Vivian is a Harvard graduate who worked as a financial journalist in Europe for 18 years before founding Global Investing. In her newsletter, she and a team of global correspondents provide original research and recommendations on international stocks and funds.

Chloe Lutts: When did you start publishing Global Investing? Why did you decide to focus on International investments?

Vivian Lewis: I started Global Investing in 1991, after returning to the U.S. when my husband was made New York Times UN Bureau Chief. I had been reporting from all over Europe for Institutional Investor-Euromoney, which covered markets for funds and pension plans, but they did not want to employ me in the U.S. because I did not have enough background and contacts.

So I decided to create, for retail investors, a publication that would give them the same kind of coverage of foreign markets. At the time, the rise of American Depositary Receipts (ADRs) and country funds made it much easier for individuals managing their own money to invest abroad.

The newsletter started out in print and came out twice a month. Now it is purely a paid, daily Internet publication. We made the final switch in 2007 but tested it for years before that.

CL: How have investing in general and publishing investment advice specifically changed since then?

VL: The most important things that have changed since I started the newsletter are the rise of Exchange-Traded Funds and the coming of online low-fee brokers. Both have made it much easier to invest globally.

But we remain committed to individual positions rather than funds in most cases, because we are trying to beat, not match the averages. We criticize flaws and lapses by discount brokers and the fees being imposed on buyers of ADRs. That is because we answer only to our own subscribers rather than to Wall Street or fund managers or even analysts. Nobody pays us except the readers.

The big new thing is that misinformation is much more widespread than ever. The proliferation of new ways to communicate has resulted in more spam, more scams, more pump-and-dump, more stock price manipulation by intermediaries and high-frequency traders, more Madoffs, more Enrons. It is not easy finding your way through the jungle. Foreign is not more dangerous, but it does require the extra skillsets we bring to the job.

CL: What do you look for in a candidate for the Global Investing portfolio?

VL: A new idea has to be better than what we already have in our model portfolios. (There are four portfolios: yield, buy and hold, speculative, and, for beginners, global closed-end and exchange-traded funds.) We try to knock out an old idea whenever we add a new position, unless we think the market is oversold (as with the tail-end of 2011).

CL: What’s one of your favorite global investments right now?

VL: While I hate to bore those who already have been reading my advice in Dick Davis Investment Digest and Dividend Digest, I think right now with the market in a new toppy mood, foreign bank preferred stocks are a good idea for almost any investor. The yields are not double digit any more; that was last year. But you still have a chance to make up for losses and inflation with quite liquid New York Stock Exchange-traded non-cumulative preferred shares from Royal Bank of Scotland, the best recovery bank I can think of. The RBS F-series preferreds (RBS-F) pay interest now and the RBS Q-series preferreds (RBS-Q) will start paying next summer. Both also should produce capital gains as the shares are below the issue price of $25. There are very few ideas which would suit all investors. This is one.

CL: What’s one important piece of advice you think more investors need to hear?

VL: Since I have been talking about yield, the most important thing to do now is to be sure the yields you buy are secure and real. Very high pay-out levels usually mean there is something amiss with the company paying them. Just looking at a chart won’t tell you what is wrong. Here is an example:

Banco Macro trades as BMA and has an 8.4% yield. I get an inquiry about this stock about once a month. BMA is Argentinian. Argentina in 2003-04 blocked bank accounts denominated in U.S. dollars to devalue the currency. People couldn’t get their funds out of the ATMs of Argentina. So Argentinians are trigger-happy and more likely than other people to start a run on their friendly local bank at the first sign of another grab by the Peronist government (and there have been several, including faking inflation to cut pensions).

So Banco Marco’s high yields depend on depositors staying put in their bank accounts. I cannot figure out when the Cristina Fernandez government next decides to do something awful to savers. My Latin American reporter, Frida, agrees. This is the Wild South. Remember, Butch Cassidy and the Sundance Kid wound up in Argentina.

CL: What do you see as the biggest challenge in the market right now?

VL: The biggest challenge in the market right now is that many people who were too scared to buy as the New Year began are now desperately trying to catch up. That often leads them to buying garbage, which looks cheap, but is still garbage. I mentioned Duoyuan Global Water (DGWIY) in my newsletter on February 9. It is a Chinese firm allegedly making water treatment machinery, which was exposed last year by the appropriately named short-seller Muddy Waters.

He discovered that the plants were not making anything and had no workers. IDGW trading was halted on the Big Board and suspended until February 8, when it started trading on the Pink Sheets as DGWIY and rose an unbelievable 28.6% in one day’s trading.

That made it the best performing ADR according to Bank of New York-Mellon, which produces a daily report on foreign stocks trading in the U.S. Its share price rose to 72 cents in one fell swoop. (We had owned it for about 10 days right until the Muddy Waters report came out and sold for $4.09, taking a one-third haircut.)

When I see performance numbers like that for a company whose factory was a deserted sham, I get frightened. The same with other very low-priced shares with a checkered past.

CL: Let us get to know you better—what else do you like to do besides investing?

VL: Besides investing I am an inveterate traveler, which overlaps some of what global investing means. I was last in Argentina in 2004 and found excellent opportunities with a bond we bought then, because it was really Spanish. We made money like banditos. But I also visited Iguazu Falls and danced the Tango and went to the country’s Andean mountains where Butch and Sundance hid out.

In India, I don’t only go to the Bangalore business centers but also to the Taj Mahal and Jaipur. In China, I visited a housing construction company we still like a lot, but also hit the Great Wall and Xian.

I also love being a grandmother, much better than being a mother because you have all the fun and none of the responsibility. We have five grandkids, ranging from 11 to four. I also like to go to concerts (not with the grandkids, whose tastes I do not share) and lectures about non-investing subjects.

CL: Thanks to Vivian for sharing her insights with us all!

Wishing you success in your investing and beyond,

Chloe Lutts

Editor of Investment of the Week


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