How this $20-billion money manager is finding international stocks that benefit from market volatility

Money manager Peter Lampert was investing in international stocks long before their renewed popularity this year, and he sees more upside despite the recent outperformance of certain markets in Europe and Asia.

“There’s still a lot of opportunity in international markets,“ says Mr. Lampert, a portfolio manager at Calgary-based Mawer Investment Management Ltd., who oversees about $20.1-billion in assets.

“Despite the market volatility and economic uncertainty, there’s money being spent, especially in areas such as defence and semiconductors – and a lot of international companies are benefiting from that.”

His Mawer International Equity Fund has also done well, having returned 15.1 per cent year-to-date as of May 31. The one-year return is 20.4 per cent, while the three-year and five-year annualized returns are 18.3 per cent and 9 per cent, respectively. The performance is based on total returns, net of fees, as of May 31.

The top three holdings, at about 4 per cent each, include global chip giant Taiwan Semiconductor Manufacturing Co. Ltd., German automotive and arms manufacturer Rheinmetall AG and Chinese technology conglomerate Tencent Holdings Ltd.

Some “excellent, world-class companies that have been overlooked,” Mr. Lampert says. “Valuations have been more attractive in those markets and, in some cases, the outlooks are improving.”

The Globe spoke with Mr. Lampert recently about what he’s been buying and selling.

(The stock tickers included below are for the American depositary receipts trading on U.S. exchanges, but Mr. Lampert owns each stock on international exchanges.)

Name three stocks you own today and why.

Taiwan Semiconductor Manufacturing Co. Ltd. TSM-N is the largest position in our fund. We first bought it in 2017 on the Taiwan Stock Exchange and continue to add to our portfolios.

It’s the world’s leading manufacturer of semiconductor chips. Many companies have tried to catch up, spending billions of dollars trying to learn the technology, but TSMC continues to pull further ahead.

For that reason, it’s the only company that can manufacture complex chips designed by companies such as Nvidia and Apple, some of the world’s most demanding customers.

And as we see semiconductors becoming increasingly important, globally, it just means TSMC’s value proposition is that much stronger, and that’s showing up in its financial results; its revenue and profit continue to grow.

It also has a strong outlook, which we think is because it has a world-class management team that continues to invest in technology and research and development. Despite all of that, we believe it’s still extremely attractively valued.

The biggest risk for the company is that it’s based in Taiwan, and 90 per cent of its manufacturing capacity is there. If there were a war or a trade embargo that would limit or impact its ability to produce in Taiwan, that’s a very serious risk for the company. We think that’s one of the reasons why investors can buy it at such an attractive price.

Deutsche Börse AG DBOEY, the German company that operates the Frankfurt Stock Exchange, is a stock we’ve owned on that exchange since 2009. The company is the largest financial exchange operator in Europe.

Still, its business isn’t trading stocks; it’s trading in interest rate derivatives. We went through a decade of near-zero interest rates and no volatility, and, during that time, there wasn’t a lot of demand for trading interest rate derivatives. Now, with more macroeconomic uncertainty and market volatility, this company is seeing stronger trading volumes, which leads to stronger revenue and profit.

When there’s more volatility and economic uncertainty, it’s nice to have something like Deutsche Börse in the portfolio that’s counter-cyclical.

Compass Group PLC CMPGY, the world’s largest catering company, is a stock we’ve owned since 2019 on the London Stock Exchange and have been adding to since. It operates cafeterias in office buildings, schools, hospitals and sports stadiums. It sounds like a boring business, but it’s also difficult to operate. Compass does it well; it gets the details right.

That was especially evident during the pandemic. While many businesses had difficulty during shutdowns, managing fluctuating staffing levels and dealing with food and wage inflation afterward, Compass managed it extremely well. It’s the largest food buyer in the U.S., the company’s largest market, so that gives it purchasing scale.

The biggest risk is probably valuation; the stock is no longer cheap. Investors are more appreciative of the strength of the management team and how well it can operate, and the opportunity to win new business. If that rate of new business wins doesn’t come through, that could lead to disappointment in the share price.

Name a stock you sold recently.

DSV A/S DSDVY, a global transport and logistics services company based in Denmark, is a company we sold in January for a gain of about 27 per cent after owning it for about four years.

Part of the reason we sold was the increasing uncertainty from tariffs. If tariffs lead to a slowdown in global trade, that would impact the company directly. It could have a short-term impact, or it could have a longer-term impact if there’s structural, more permanent rerouting of trade flows or less global trade.

The management team had done an excellent job, including acquiring other freight forwarders, so our investment case had played out. Last year, it bought Schenker [the logistics arm of Germany’s state rail operator, Deutsche Bahn], the largest acquisition in its history, which made DSV the world’s biggest logistics company.

There aren’t any more large acquisitions that could move the needle for DSV, so with less upside and increasing downside with the tariff uncertainty, we decided the risk-reward was no longer favourable and we exited the position.

This interview has been edited and condensed.