Pick: Tesco (TESO)
Sarah Ketterer, manager of the Causeway International Value Fund (CIVVX) (and CEO of its owner), likes to find companies everyone else hates. That philosophy has helped the fund return an annualized 6.7% for the past three years, vs. 4.0% for the MSCI Europe Australasia Far East index. "We scour the globe for prices we consider anomalous and just too low," she says. Tesco, the U.K.-based grocery chain, has seen its shares lose more than a third of their value in the past year and is now trading at a bargain P/E of 8. "They took their eye off the ball," says Ketterer. "Their profit margins have been slipping because they haven't been satisfying their customers." In her view, the problem can be fixed: "It's not like the business is enduring some major secular change." Tesco has begun to restructure and is expanding its online business. Given its financial strength, 5.4% dividend yield, and position in a recession-resistant sector, Ketterer calls this a low-risk bet: "We're not gunslinging here."
--A.F.
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