![]() Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. For detail information about the Morningstar Star Rating for Stocks, please visit here Past performance of a security may or may not be sustained in future and is no indication of future performance. Investments in securities are subject to market and other risks. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. A 5-star represents a belief that the stock is a good value at its current price a 1-star stock isn't. This process culminates in a single-point star rating that is updated daily. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. It is projection/opinion and not a statement of fact. “Although Orbis has reduced its yen position, it continues to believe that the yen is attractive from a long term purchasing power of parity perspective relative to other currencies and the Orbis Global Equity Fund remains overweight the Yen and underweight western currencies relative to the benchmark.” Cooper concludes.The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. The carry trade has begun to unwind, resulting in the yen appreciating significantly against other major currencies. This allowed investors to borrow at low interest rates in Japan and use the funds to invest in higher yielding assets in other countries. In the case of the Orbis Global Equity Fund, for example, its overweight position in the yen hurt the fund for some time due to the ‘carry trade’. Managing currency selection is also important. Selecting the most attractive stocks is not the only aspect of successfully managing a global fund. Therefore Orbis continues to invest with a long-term perspective through the cycles, consistently applying their investment philosophy and process which they have done successfully over the last 18 years,” says Cooper. “As with Allan Gray, Orbis believes it’s difficult to predict the bottom of a bear market or exactly when a stock will revert to fair value. He says that while it’s possible that stock markets will continue to decline further, Orbis believes that its Global Equity Fund should provide higher long-term returns than cash. Says Cooper: “by continuing to methodically apply its investment philosophy, Orbis has found it possible to look for opportunities amongst the turmoil.” But it’s during market turmoil that stock pickers really come into their own. In a bull market it’s easy to pick stocks as a rising tide tends to lift all boats. “The Japanese stock market is trading at its 25-year low, reached in 2003, which is incredible considering the improvement in earnings and the increased strength of balance sheets in Japan since then,” says Cooper. This is particularly true for selected domestic Japanese shares, which have been sold off with global markets despite trading at discounts to their intrinsic values. Mahesh Cooper, who is a director of Allan Gray, says Orbis is increasingly finding opportunities in selected shares and despite the near term prospects, believes that the long term prospects are better than they have been in years. ![]() As a result of this Orbis, Allan Gray’s global asset management partner, continues to identify attractive opportunities for investors based on its contrarian investment philosophy and bottom-up stock selection process. Because of this, investor sentiment has turned extremely negative resulting in equity prices falling by more than the underlying value of companies. Only 5% of the companies that make up the World Index were able to deliver a positive return in 2008. ![]() The strong negative returns delivered by global stock markets last year meant that there were very little opportunities for equity portfolio managers to hide. ![]()
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