Fund Manager Kevin Duffy Favors China

Always a contrarian investor, Kevin's unique investment style serves his clients well.

Kevin Duffy is the editor of the Coffee Can Portfolio bimonthly newsletter. He and his partner did extremely well At Bearing Asset Management during the Financial Crisis when that firm registered a triple digit gain while most everyone else suffered huge losses. In the following years, the fund didn’t fare as well so Kevin adjusted his investment philosophy with a contrarian value style model that has done quite well. As you will hear from my interview with Kevin, he now believes that Chinese stocks are extremely undervalued even as U.S. Equities as a whole are historically overvalued.

Below is Kevin’s Coffee Can Portfolio’s performance from inception to present.

While the S&P 500 has outperformed the Coffee Can Portfolio 85.99% to 43.9%, keep in mind that the S&P has been driven much higher by passive investing and the magnificent seven stocks. That’s at a time when US equities comprise about 60% of global equity market capitalization against a 4% China share despite the fact that China is the second largest economy in the world.

Jesse Felder pointed out in his January 25 missive, “Overseas investors have never been more bullish on U.S. equities than they are today. ‘Over the past three months, foreigners purchased US equities at a record pace of $76.5B,’ reports Yardeni Research (via Daily Chartbook). The firm continues, ‘One note of caution: Their buying has a record of being a contrary indicator. They tend to be big buyers right before bear markets.’"

At the same time, Insiders are not betting on a rally. The percentage of publicly traded corporations experiencing net buying from corporate officers and directors is plunging!

Its not easy being a contrarian but as Kevin’s past reminds us, doing so if you have the patience to wait out an impending change can be extremely rewarding. Kevin thinks China offers a good opportunity now. He has approximately 13% of his funds resources allocated to Chinese stocks. Time will tell.

I hope you enjoy my interview with Kevin.

Best wishes,

Jay Taylor

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