Published:
September 1, 2008
Harvard
Management Co. is the steward of the
esteemed university's endowment
fund, which, at about $35 billion,
is one of the largest in the
country. It's safe to assume that
Harvard Management is run by
remarkably intelligent and capable
people. So maybe it's not surprising
that Harvard grew its portfolio by
+23% last year, and its long-term
results are easily in the top 5% of
all institutional funds.
Harvard didn't lock in these
market-crushing gains by investing
in U.S. companies and index funds.
It couldn't have -- the S&P rose
only +4.3% last year.
A peak inside Harvard's portfolio
reveals that the university
currently has $837 million invested
in ETFs that are focused in Taiwan,
China, South Africa and Brazil. And
Harvard has been actively adding to
its international holdings, boosting
its stake in countries like Brazil
(up +573.5% in five years), Mexico
(+245.1%) and South Africa
(+156.2%).
You might think you'd have to
be on the dean's list to see
Harvard's portfolio, or at least be
a member of the exclusive Porcellian
Club. Not so. Harvard reports the
details of about $3.3 billion of its
endowment to the Securities and
Exchange Commission (SEC). Our
research staff crunched the numbers
from those filings. The facts they
uncovered won't just put information
in your head, they can put dollars
in your pocket.
While Harvard's portfolio provides a
fascinating view of where these
experts expect the next growth
spurt, we're going to take you a
step further. We're going to show
you how to add a rich income stream
to that growth by finding just the
right investments in Harvard's
high-growth hot spots. After all,
why not have the best of both
worlds? For example, we've found a
telecom in Brazil with a 12.4%
yield.
So what is this prestigious
university doing to generate such
remarkable returns?
First, let's look at what the brain
trust at Harvard has sold:
It got out of Oracle, Starbucks and
Valero. It sold blue-chips like
Wal-Mart, DuPont, Home Depot and
Exxon Mobil. Warren Buffett's
Berkshire Hathaway may own shares of
M&T Bank, Johnson & Johnson,
American Express, Coca-Cola and
Norfolk Southern -- but Harvard sold
its entire stake in all of those
companies.
So what does Harvard own?
Harvard owns 209 securities. On the
surface, that's about the same as
other funds its size, give or take.
But looking a little closer we
notice that Harvard's top ten
holdings account for almost 65% of
its portfolio.
That level of concentration is
pretty uncommon. Most funds
with a similar asset base might
allocate roughly 20% of their
portfolio to their top ten holdings,
with the largest holding
representing about 3% of the total.
Harvard's top holding makes up 12.8%
of its portfolio -- four times the
size of most fund's largest stakes.
So Harvard is clearly far more
confident of its picks' ability to
generate immense gains. It isn't
spreading its money around. It isn't
hedging its bets. It has made its
selections and is counting on them
to deliver huge results.
Granted, Harvard's top holdings are
in more diversified funds, but there
can be no question it is betting big
on the international front. Of its
top ten equities, eight are
exchange-traded funds (ETFs), and
seven of those are focused on
international markets. In fact,
roughly $1.4 billion of Harvard's
assets -- about 45% of its portfolio
-- is invested in international
ETFs. Its foreign equities have
returned an annualized +19.8% for
the past five years -- a rate of
growth that turns $1 billion into
$2.5 billion in five years.
Here's a closer look at Harvard
Management top ten portfolio
holdings:
|
Harvard's Top Ten Holdings |
Ticker |
Allocation |
Value |
|
iShares
Russell 2000 Index |
IWM |
12.8% |
$417,174,000 |
|
iShares MSCI Brazil |
EWZ |
12.2% |
$395,778,000 |
|
iShares MSCI Emerging Mkts Index |
EEM |
9.0% |
$293,247,000 |
|
iShares FTSE/Xinhua China 25 |
FXI |
6.1% |
$199,322,000 |
|
Weyerhaeuser |
WY |
5.7% |
$185,917,000 |
|
iShares MSCI South Korea |
EWY |
4.7% |
$153,627,000 |
|
iShares MSCI Mexico |
EWW |
4.7% |
$152,974,000 |
|
iShares MSCI South Africa Index |
EZA |
4.3% |
$140,119,000 |
|
iShares MSCI Taiwan |
EWT |
3.2% |
$102,563,000 |
|
Clear Channel Communications |
CCU |
1.4% |
$45,760,000 |
| |
TOTAL |
64.1% |
$2,086,481,000
|
|
|
|
|
|
We've
been telling our readers about the
importance of international investments
for years. In fact, Harvard's No. 2
holding, the iShares MSCI Brazil Fund
(NYSE: EWZ), is a recommendation we
started giving to to investors -- in
2004. This pick has returned an amazing
+573.5% in the past five years. That's
exactly the type of return you need if
you want to propel a $3.3 billion
portfolio forward at a +23% annual clip.
Today, more than 12% of Harvard's
portfolio hinges on Brazil's continued
success.
According to Harvard's August 18th SEC
filing, it bought 7.2 million shares of
EWT, the iShares MSCI Taiwan Fund in the
second quarter -- a $100 million
purchase. We call Taiwan "Harvard Hot
Spot No.1."
Readers of our StreetAuthority's premium
High-Yield
International newsletter have
already heard the Taiwan story. Editor
Nick Lanyi presented his findings on
Taiwan's promise earlier in August.
And his report didn't stop with an
insightful analysis of the country's
prospects. Nick went on to spotlight a
high-tech manufacturer whose shares not
only offer the same kind of growth
potential that Harvard is betting on,
but that is also paying a robust 9.2%
dividend.
Harvard's filing identified three more
"Hot Spots" where it increased its
holdings.
The university is undoubtedly wise to
pursue a growth strategy in these
countries. And while businesses in those
nations are expanding at a robust clip,
these countries are also home to mature
industries that pay steady dividends. To
that end,
High-Yield International
has sought -- and found -- a host of
compelling income opportunities in the
same countries Harvard is betting
hundreds of millions of dollars on.
Here are Harvard's other Hot Spots,
where Nick also found high yields:
Harvard Hot Spot No. 2: South Africa.
Harvard has invested $140 million in
South Africa. Nick was hard at work
studying South Africa this spring and
unveiled his findings to
High-Yield
International subscribers in May. He
introduced his readers to a telecom
stock there with a 9.3% yield.
Harvard Hot Spot No. 3: China.
Harvard has $200 million in China. In
July, Nick took his readers there and
showed them a leading electric utility
with a 6.7% yield. This utility's price
appreciation potential is significant:
The Chinese government just allowed it
to raise rates +5.7%, effective August 20th.
Best of all, this stock trades as an ADR, so it's every bit as easy to own as
one of Harvard's ETFs.
Harvard Hot Spot No. 4: Brazil.
Harvard's stake in Brazil is $400
million. Nick manages two portfolios for
High-Yield International subscribers,
"Reliable Income" and "Ultra
High-Yield." His "Reliable Income"
Portfolio contains a Brazilian
telecommunications company that's
currently yielding 12.4%. Nick published
his analysis about Brazil in his April
issue.
Harvard's investment strategy is devised
by the best minds in the business. They
don't earn +23% a year by being lucky --
they earn it by being smart. But if
you're looking for gains like these PLUS
a rich income stream, you're not going
to find it in Harvard's portfolio.
Only
High-Yield International
will provide you with hefty yields of
9.2%, 9.3%, 6.7%, and 12.4% in these
"Harvard Hot Spots." And high yields
like these are just the beginning --
every monthly issue of
High-Yield
International will be chock full of
high-yielding investment ideas.
Learn how to get the names of all
four of these high-yielders right now.
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