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SOGEN FUNDS'
JEAN-MARIE EVEILLARD ET AL.
(continued from preceding
page)
OID: And, as I recall, Peter Cundill and Tim McElvaine told us about EuraFrance and Paribas.
Eveillard: And Peter talked with us about Paribas. In fact, we even looked at it. But we decided that there was more uncertainty in their real estate loans than we wanted to face. But Peter was right and we were wrong - and the stock's moved up.
[Editor's note: See the August 8th, 1996 edition for our feature with Peter Cundill and Tim McElvaine.]
Eveillard: These holding companies generally have a variety of stakes in other companies and, occasionally, some miscellaneous real estate holdings. And, therefore, we're not thinking in terms of P/Es, but rather discounts to net asset value.
Plus, almost all of their stakes are in companies that are themselves publicly traded. So calculating net asset value isn't very complicated.
OID: You just look up the price in the newspaper - assuming you get a French newspaper.
Eveillard: Exactly. Sometimes they have other assets like real estate - the value of which you have to estimate. However, in essence, we're buying what amounts to a portfolio of publicly traded companies.
It's not a diversified portfolio because they're often major stakes. Sometimes one stake can represent 30% or more of the total net asset value. But what you do have is a portfolio composed of a few stakes which you can buy at a huge discount.
OID: I don't want to look a gift horse in the mouth, especially one selling at a huge discount. But doesn't the question then become a huge discount to what?
Eveillard: Generally not - unless you're worried that the stock prices of those various stakes are way overvalued or you see that their management has been unable to grow net asset value.
And something else gives us comfort: There are a lot of these holding companies in France. And in some cases, their net asset value has increased 15% or more a year for 5, 10 or even 15 years.
OID: You're pulling my leg.
Eveillard: Not at all. And, as I recall, that included periods during which the French stock market didn't do that well. So the heads of a few holding companies have done a pretty good job. And those are generally the ones that we own.
OID: Certainly 15% or more per year growth at the kind of discounts you're describing sounds like a mighty hard combination to beat. But I presume that they don't usually sell for a huge discount?
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