Krishna Mohanraj joined Diamond Hill Capital Management at an opportune time. The portfolio manager started working at Diamond Hill in 2012 as the investment firm, then primarily known for its domestic stock coverage, was slowly building up its international expertise. . In 2019, it launched the International Foundation. For Mohanraj, this fund is a perfect fit for his experience and abilities. The 47-year-old portfolio manager has lived and worked on three continents, particularly during volatile market periods. He grew up in South India during the economic crisis of the 1990s, worked for a software company, i2 Technologies, in the US during the tech crisis of the early 2000s, and worked as a research associate senior at Sanford C. Bernstein in the UK in 2011. “It was a combination of being in different places” that got him to his position, Mohanraj said. “Seeing bad things happen and then recovering. I feel like that has framed who I am and how I invest today.” Today, the investor manages the Diamond Hill International Fund (DHIAX), rated five stars by Morningstar. It may have started in 2019, but it has quickly built a solid three-year track record, placing it in the top 5% of its peers, according to Morningstar. The fund has grown 10.5% year-to-date in 2023, placing it in the top 15% of funds in its portfolio. Mohanraj hopes that is because the fund focuses on differentiated bets. “International is exciting, because that’s where you want to operate because the benchmarks are terrible – because there’s a lot of bad business, right?” he say. “So that’s where you want to be an active stock picker.” The idea of ’rough diamonds’ To build their portfolio, Mohanraj and his team first traded through multiple exchanges, browsing through tens of thousands of international stocks, many of them That’s what he calls “trivial,” to find about 1,000 names that he considers investable. These are even further reduced to a concentrated portfolio of just 54 stocks. The Diamond Hill Fund, compared to the MSCI ACWI ex USA Index, has approximately $65 million in assets, an expense ratio of 1.150%, and . It also has a low turnover of 21%. For investors, these names represent long-term opportunities over a 5-year period. Furthermore, they are highly differentiated businesses, whether they are well-known companies or “diamonds in the rough”. “We consider our portfolio to be about 50 companies, give or take five, of those that we understand very well, which we think represent the best opportunities,” he said. “And that’s the idea of a well-managed portfolio, of what I want to own on the international stage, that’s the mindset.” A stock pick that illustrates an investor’s strategy is Dino Polska SA. The Polish grocery chain is not well known to investors, but Mohanraj said it is a fast-growing business and has managed to create its own niche in the country. As of May, DHIAX has allocated 2.4% of its holdings. Shares listed in Warsaw this year are 20% higher. Part of that growth is thanks to its small store format. Dino Polska, which owns stores on its own land, often operates in many rural areas outside of major cities to avoid competition with larger retail chains. The company’s stores are more concentrated in the western part of the country. Meanwhile, Mohanraj said Poland itself is a unique market, as the country hasn’t seen a recession in 30 years. Moreover, because houses are usually smaller in size, which is a remnant of Communist history, people often have to go shopping for groceries. “Going to the grocery store is almost a daily thing for them, so they use it like an extended fridge,” says Mohanraj. They buy a lot of fresh food and meat, which is part of the diet.” He points out that Dino Polska also has her own meat business. According to FactSet data, these characteristics helped Dino Polska increase sales by 34% on a 5-year compound annual growth rate basis. “We kept asking ‘Why don’t the big guys compete? Why can’t the big guys take market share?’ but it’s something that’s solid enough that they can turn a decent profit and keep growing for a long time in a very unique setup,” said Mohanraj. we thought, ‘Hey, the market hasn’t been penetrated very deeply yet’ “unprecedented” given the multigenerational appeal of its intellectual property. For example, when The Super Mario Bros. The movie was released earlier this year, it broke box office records and is now the highest-grossing film worldwide in 2023, according to Box Office Mojo. “Disney is probably the only company that comes to mind,” said Mohanraj, who as of May also allocated 2.4% to Nintendo. There are certainly times when the investor decides to sell his investments, or when the stock has increased in price significantly, or when the investment thesis is not as successful as he thought it would be. One option that Mohanraj said he has considered for years, but has yet to invest in, is Russian bank Sberbank. He said banking was a good business that he worried could get caught up in some extreme results in the country. The fund has also diversified its bets into other companies. One of its biggest and longest-running bets is on Fairfax Financial, a Canadian holding company founded by V. Prem Watsa, who is considered the “Warren Buffett of Canada” and runs the company. its similarity to that of Berkshire Hathaway. “When you take a portfolio and compare it to a benchmark, sometimes it will look different. Sometimes it will perform better, there are periods it will perform worse, but we are very confident. that in the very long run, these are the places that you want to put your money in,” he said. “Especially if you’re worried about corporate governance, geopolitics or war, why would you just buy a fraction or a fraction of everything out there, especially trivial names you don’t think about? can develop in different iterations of the world,” he said. “There’s a lot of risk out there.” Mohanraj, who became interested in stocks after reading Warren Buffett’s letters, said he benefits from a strong team who are all interested in hunting down good businesses. “Every morning, it feels like we’re here to learn something new, to try to double-check our assumptions,” he says. “Doesn’t seem to work.”