U.S. economic uncertainty is high due to the trade war and budget deficit worries. And there's an emerging investment theme on Wall Street and with the best mutual funds: Put more money to work globally.
With that in mind, IBD caught up with Miguel Oleaga, co-manager of Thornburg Global Opportunities Fund I (THOIX), an IBD 2025 Best Mutual Funds award winner.
This top-performing mutual fund scours the earth for stocks. Oleaga and fellow manager Brian McMahon take advantage of the flexibility this go-anywhere fund affords. Buying international stocks, which have lagged U.S. shares for years and trade at lower valuations, is paying off.
The typical global stock fund invests about two-thirds of its assets in U.S. stocks, according to Morningstar. But Thornburg Global Opportunities Fund currently owns two times more foreign stocks than it does U.S. stocks. As of April 30, the fund had 63.5% of its assets invested in foreign equities and just 34.1% in U.S. stocks.
Going Global Pays Off For Best Mutual Funds
The fund's strategy has netted impressive benchmark-beating returns. Thornburg Global Opportunities Fund has topped the benchmark IBD uses to determine its list of best funds in the past one, three, five and 10 years.
This fund, which holds 30 to 40 stocks, is winning again this year. The $1.3 billion fund has posted a total return of 14.54% through June 2, more than 8 percentage points better than funds in its category. The bullish start to 2025 for Thornburg Global Opportunities Fund tops 99% of peer funds.
That high benchmark-beating rate isn't an outlier, though. Thornburg Global Opportunities Fund has topped 99% of category peers in the past five-year period too, Morningstar says. It has also topped nine out of 10 peers in the past 15 years.
IBD: Do you typically own so many foreign names?
Miguel Oleaga: The positioning of the portfolio today is very much a representation of where our investment process is driving us to. If you were to look back at our portfolio over the last decade, our weighting of the U.S. versus foreign equities (was) pretty much even. Today, we're roughly 25% underweight U.S.
Best Mutual Funds Looks Overseas
IBD: What's driving the shift to foreign stocks?
Oleaga: That's where we're seeing the opportunities. The outperformance of the U.S. in recent years has been warranted. But multiples have become a bit rich. When we look outside the U.S., the multiples haven't really moved that much.
IBD: What types of foreign stocks do you like?
Oleaga: Names that we … (consider) interesting opportunities are companies that are trying to manage their businesses more efficiently. We're trying to find companies with a pretty good earnings growth outlook, stable to improving return metrics (with) starting valuations that are a lot lower (than U.S. stocks). So, that has kind of driven us to where we are today. The opportunity outside the U.S. has been pretty good the last couple of years. And it continues to be so.
IBD: Describe the fund's philosophy.
Oleaga: When evaluating stocks, we have discipline and sensitivity to the prices that we pay. We try to take advantage of being a global portfolio. We build a lot of flexibility in terms of where we can invest around the world geographically and from a market-cap standpoint. We only tend to own about 30 to 40 stocks.
Traits That Appeal
IBD: What stock traits do you look for?
Oleaga: We're looking for quality businesses. We try to buy them at attractive prices. And then we make sure there's a path to success, which essentially means that the business is tracking the way we think it should.
IBD: How do you define quality?
Oleaga: At a sector level, we ask: What are the businesses that are competitively advantaged? Do they have an acceptable starting level of return today? Are they adding value? Do we think that returns can get better?
IBD: Where does valuation come in?
Oleaga: A kind of working metric is: What is the market asking us to pay?
We try to balance the price we're paying with the level of growth and quality that we're buying in the marketplace. We just make sure we watch very closely (to see if) the businesses are progressing as expected.
Digging Beyond The Obvious
IBD: What other stock characteristics do you look for?
Oleaga: In the collection of companies we own, they are doing one of two things. One is, you see companies where access to capital has become a bit more limited in recent years. And the better management teams have really understood that they need to run the companies better, manage their capital better, maximize the value of their businesses, and focus the company on their best assets. We've been focusing on better operators.
IBD: What's the second key attribute your companies possess?
Oleaga: They take a successful playbook for what you see in the U.S. and they try to replicate those overseas. For example, Coca-Cola Icecek, a subsidiary of Coca-Cola, is a beverage bottler based in Turkey that operates in several Middle Eastern countries. They're taking a business model that's well proven and successful, and replicating it in (a foreign) marketplace.
In both of those categories, you can find companies with very attractive underlying growth. It's not always shoot-the-lights-out growth, but very consistent growth. These businesses have valuations that have been really supportive for the level of growth and quality that we're picking up outside the U.S.
Best Mutual Funds Stick To Strategy
IBD: Discuss your buy strategy and valuation discipline.
Oleaga: I don't think it's a secret that the businesses we own are good companies. The reality, though, is good companies are priced out (of our buy sweet spot) most of the time.
But there are points in time when there's geopolitical headwinds, or other headwinds, that cause things to shake loose (and valuations to contract). And that's where we get an opportunity to buy them. We try not to force things and say, we have to own this or we have to own that. We just look for opportunities and try to step in and buy (when the price is right). That doesn't happen all too often. But it happens with enough frequency to build a pretty good portfolio over time.
IBD: How cheap does a stock have to be to buy?
Oleaga: We're not always looking for the cheapest valuation necessarily. We just want to get a good price, relative to the quality of the business.
The names we look for tend to be essential businesses in the areas of the world and sectors that they compete in. They tend to have a dominant market share and assets that are unique and very proprietary that give them a durable competitive advantage over time. We wait until the valuation gets to what we think is an attractive price point.
Patience Is A Virtue For Best Mutual Funds
IBD: Is patience part of your investing strategy?
Oleaga: There are names that we'll have on our watchlist, just waiting for things to shake loose. And then when there's some turbulence in the world and the name gets attractive, we'll step in and buy.
IBD: Any examples?
Oleaga: Let me give you one performance contributor for us in the last couple of years. It's TJX Cos., the parent of TJ Maxx, the U.S. off-price (apparel and home goods) retailer. We've owned the company a long time.
They have a few key advantages. They help their suppliers offload excess inventory ... and make a pretty good profit margin in return. And the consumers (who shop at stores like TJ Maxx, Marshalls and HomeGoods) get great prices for brands that they know and love.
IBD: When did you buy it?
Oleaga: When Covid struck. We had admired TJX for a while. They had to shutter their stores. The stock dropped to a level that we thought was pretty attractive. The business rebounded immensely. You know, the world normalized.
Best Mutual Funds Like Financials
IBD: You're bullish on foreign banks. Which ones?
Oleaga: Bank of Ireland is one of our large European bank holdings and is one of the leading banks in Ireland. It has benefited from industry consolidation (after the 2008 financial crisis). Ireland went from about a dozen banks to four banks. Bank of Ireland is one of the best, if not the best, banking franchise in Ireland.
In addition to that, the Irish economy has been one of the fastest-growing economies within Europe. That's an attractive setup for them to be able to grow their loan books at a pretty reasonable rate. They are earning really attractive returns on capital. The stock trades at a very attractive valuation for the quality of the franchise in terms of growth that they're able to generate.
IBD: The fund isn't heavily invested in tech or U.S. tech giants. Why?
Oleaga: We like quality businesses but we are also very mindful of what we're paying for those businesses. I think the underweight, especially in U.S. tech, is a representation of that. I'll note, though, that we're also overweight communication services, which is made up essentially of tech companies.
IBD: Why the focus on foreign tech stocks?
Oleaga: One of the things we always think through as global investors is if we see a winning business model or a winning macro industry trend, we tend to then look through and analyze the value chain for that industry. We get a good feel for the different players in that value chain, and the ones that seem to be the better operators in their niche. We try to get a better balance of risk/reward by buying something in the value chain at a better price.
Picking The Tech Winners
IBD: So it's a valuation decision?
Oleaga: That's kind of what happened with our tech investments, especially in the U.S., for the last 10 years. Hyperscale cloud computing and things of that nature have been key drivers of market returns. And then in the last couple of years, AI has been a huge driver of returns. We're very positive long term around the implications of what AI can do for society in terms of efficiency. When we look at the quality of businesses, they're certainly there in the U.S., but the valuation support hasn't been. So, we've looked at the value chains around these industries to try to find different players that could benefit from some of these dynamics.
IBD: Can you share an example?
Oleaga: Alibaba is one. (For years, the Chinese e-commerce company) was empire building, for lack of a better term. But in the last few years, we've seen a big change in the culture there. The company started to really focus on its best assets: their domestic retailing business, their international retail business and their cloud business. They've really tried to de-emphasize or minimize losses everywhere else, and kind of deconsolidate things that don't make sense.
Best Mutual Funds Consider China
IBD: Is Alibaba also benefiting from AI?
Oleaga: The Chinese adoption of AI is a nice (complement) to the cloud business, especially with DeepSeek, (a large language model AI assistant). And looking at some of the token (e.g., AI) usage on the platform, we're still seeing very attractive growth. The stock trades at a very low multiple (15.4 times earnings, according to Morningstar) relative to the earnings power that it can have.
What we also like is they generate a lot of free cash flow, and they're returning it to shareholders. Over the last three-plus years, they've reduced their share count by about 14%, which we think is attractive. And we think they still can continue to return capital to investors as the business continues to improve.
Another AI play in the portfolio is Taiwan Semiconductor Manufacturing, a major manufacturer of AI chips. In the AI scene, TSM is clearly one of the best franchises. Now, there are geopolitical risks with China. But we look at the quality of the business and they're quite strong. And in the last few years, TSM has only gotten stronger.
Foundry competitors, like Intel in the U.S., have really stumbled (when trying) to compete with Taiwan Semiconductor. And especially around AI, TSM is really the leader. And that should allow them to have very good, very durable kind of earnings growth for the foreseeable future.
Investing Beyond The U.S.
IBD: Do you agree with the assessment from Wall Street that international is the place to be?
Oleaga: Yeah, we've probably had our underweight to the U.S. for at least the last four or five years. I think the awareness of these opportunities is just becoming more invoked today (due to economic, trade and political headlines out of the U.S.)
IBD: What's the secret to your fund's long-term success?
Oleaga: Flexibility is a big one. Consistent process is another. Since the fund's inception in 2006, it's always been the same investment process. Looking for quality businesses. Making sure we're very sensitive to the prices that we pay, as we don't want to overpay for businesses. And then having success tracking business and company trends; making sure we're on top of the businesses. If you buy good things at good prices, that usually tends to lead to good outcomes.
