15 Jul 2010 Video: Eveillard Sees Multinational Stocks as `Attractive'
Jean-Marie Eveillard, senior advisor for First Eagle Investment Management, talks about European government debt, stocks and investment opportunities...

09 Jun 2010 Core|Satellite Investing - First Eagle Funds
Many practitioners of core|satellite investing use the core of their clients’ portfolios to generate market-like returns with market-level risk exposure, or beta, and use satellite investments to produce excess returns, or alpha. Within this framework, passive investment vehicles — index funds and ETFs — have become standard core investments.

At First Eagle, we question the foundation of this approach to portfolio allocation. Beta, we have all discovered, can expose an investor to a very bumpy ride. In our opinion, the graver concern for investors is not short-term volatility, alarming and uncom- fortable as it may be, but the possibility of permanent impairment of capital...

04 Jun 2010 Video/Transcript: Professor Bruce Greenwald interviewed by Morningstar (4 parts)
- Why First Eagle Favors Amex Over Citi
- Investors are again being offered an extraordinary opportunity to put capital to work in high-quality companies at a good price, says Columbia professor Bruce Greenwald.
- Opportunity Even When the Market's Not Cheap
- Greenwald Wouldn't Bite on Apple

12 May 2010 Video: McLennan of First Eagle Investments
Matthew McLennan, a portfolio manager at First Eagle Investment Management LLC, talks with Bloomberg...

15 Apr 2010 Video: Jean-Marie Eveillard on Bloomberg
Eveillard Likes Kansai Paint, Pargesa, Vulcan Materials...

24 Feb 2010 Video: Jean-Marie Eveillard on Bloomberg
Eveillard Likes Sodexo, Berkshire Hathaway and Hankyu...

24 Feb 2010 Video: Jean-Marie Eveillard on Bloomberg
First Eagle's Eveillard Discusses Toyota's Shares...

02 Feb 2010 How We Think About Risk: Part 2
In seeking to protect our investors against permanent impairment of capital, we rely on five operational principles: (1) margin of safety, don’t overpay for assets, (2) diversification, let positive and negative surprises average out, (3) low leverage, avoid potentially catastrophic losses associated with high leverage, (4) balance, build a portfolio that is not overly exposed to any single macroeconomic risk and (5) protection against extreme outcomes, consider assets, like gold, that may do well if the world falls apart. For each of these principles, First Eagle Funds has processes in place that seek to limit the risks involved in investing.

Dataroma's opinion: Good write-up, but strongly disagree with point (5) - Protection against extreme outcomes. It's unlikely that gold will "do well if the world falls apart". Gold has no earnings, has hardly any utility, and only has any "value" because people think it does. Besides, what is the point of protecting 5% of your portfolio (which is the current Value Fund's Gold holding) against extreme events. "Protection against extreme outcomes" is probably a futile attempt since even if possible, in the long run it will come at a huge cost.

22 Jan 2010 First Eagle Funds Conference Call Transcript
A Graham stock is one that is a statistically cheap stock where the value doesn't necessarily grow and maybe even shrinks over time. A Buffett stock is sort of the opposite of that. It's a business with some sort of franchise where the intrinsic value tends to grow over time. In that case, we require different discounts, depending on what kind of a business it is. If it's a Graham-type stock, we tend to be out at intrinsic value and we tend to require a larger discount to intrinsic value. If it's a Buffett-type stock, we tend to acknowledge that the growth in intrinsic value is worth something in itself and will require less of a discount to intrinsic value; and, we're not necessarily selling our entire position at intrinsic value with a Buffett-type stock. The vast majority of companies are somewhere in between. It takes quite a bit of judgment to determine where on the spectrum these companies lie. Over time, it's always easy to find a Graham stock, because it's statistical analysis. The Buffett-type of company where there's a lot of judgment involved takes time and requires a lot of analytical effort and we have great analysts to do that work. And, for the most part, over not just the last year but over five to ten years, the portfolio has shifted more towards Buffett-type companies from Graham-type companies. It's a trend that probably will continue into the future.

One big observation we would make, is that as valuations have recovered from very distressed levels earlier in the year to levels that we would see as being more consistent with a more normal valuation backdrop -- we feel that we are in an environment that is characterized as neither bargains nor bubble -- the focus of the team has to be as resolute as possible on the search for bottom-up opportunities at the security-by-security level. If the market is not mispriced as a whole, you have to look for mispricing at the individual security level, which is, indeed, what we've focused on doing historically.

27 Dec 2009 First Eagle Funds - Intrinsic Value and Margin of Safety
With our efforts focused on minimizing permanent impairment of capital, we also do not promise to make you the most amount of money in any short period of time. You have seen that in our results. Look at the late '90s where we lagged and we were punished for it, but as Jean-Marie said famously back then, in that lagging period we did not change what we did or how we approached investing. In fact, he said, “I'd rather lose half my shareholders than half of my shareholders' money.” We did lose half our shareholders; we did not lose half our shareholders' money.

Looking at the subject of long term investing, people are a little upset that buy and hold hasn't worked for the last ten years. If you bought in 1999, your annualized return is at approximately minus 2% for ten years. But the buy and hold approach over the long term is wholly dependent on the price that you pay for something. If you bought Cisco at 100 times earnings in 1999, over the long term, you will lose money. If you bought 3M at eight times earnings, with a 4% dividend yield over ten years, there's a high degree of likelihood that you'll make money over the long term. But it all depends on what you pay. Buy and hold is not dead.

And finally, to those very simple concepts that Graham introduced to us and Buffett developed and Jean-Marie applied on an international stage, we've layered our own sort of attentiveness to loss avoidance. Buffett said it best when he said that the two most important rules to investing are, “Rule number one, don't lose money. Rule number two, see rule number one.” When he said “lose money,” he didn’t mean you buy a stock at $20 and it goes to $15. He means if you buy a stock at $20 and you later find out it's only worth $15, that's what is to be avoided at all costs.

10 Dec 2009 The Wall Street Transcript - Interview with Matt McLennan of First Eagle Funds
"Many of our biggest positions are the sorts of investments that people would say looks decidedly mundane. ...mundane is beautiful for us, provided we own it at the right price."

The most important thing to understand about our investment philosophy is that our long term goal is first and foremost to preserve the real purchasing power of our clients’ capital, and we do so by and large through the ownership of enduring enterprise, buying businesses that we think are there for the long haul and buying them with a valuation margin of safety. We’re very focused on avoiding permanent impairment of capital, that’s at the core of our philosophy. We have a great deal of flexibility in that we look across the entire world for opportunities. We’re also willing to look across the capital structure. Sometimes we’ll make an investment in a high-yielding bond if we think we can get an equity-like return with a more senior position in the capital structure. But the majority of our investments are in businesses that we think are good companies at good prices. We have a long term holding period; we tend to own businesses for five years or more on average. We believe that is a core advantage for us in that our patience is quite differ- ent from that of most global investors, and it enables us to take a bit different perspective and to accumulate more knowledge on the businesses that we own.

03 Dec 2009 Video: Jean-Marie Eveillard on Bloomberg
Likes large cap quality multinational stocks that have lagged the broader market...

14 Sep 2009 video: Jean Marie Eveillard
Jean Marie Eveillard of First Eagle Funds interviewed by Steve Forbes...

12 Sep 2009 Jean-Marie Eveillard - Forbes interview
We hold securities for five years. If you are a long-term investor you accept in advance that every now and again you will lag. You are not trying to keep up with your peers over a short-term basis. But to lag is to suffer. I'm not saying value investors are masochists. But I am saying value investors are willing to incur short-term pain to achieve long-term gain.

09 Sep 2009 First Eagle Funds: How We Think About Risk
We at First Eagle define risk differently: as the danger of permanent impairment of investor capital. Our definition departs from portfolio variance in two important respects. First, variance encompasses both temporary and permanent luctuations in portfolio values. But, because we have a long-term focus, we are concerned only with permanent changes in value. Second, variance treats upward and downward movements in value equally. We regard risk as being related to losses, not unexpected gains; thus, we are primarily concerned with downward movements only.

If you pay $100 for an asset that is worth $50, then half of your money is gone for good!...

17 Jul 2009 Value investing: it makes sense and it works, over time
Anybody who reads Benjamin Graham’s The Intelligent Investor can see that it’s not about complex mathematical models; it’s all about common sense. As well, Warren Bufett’s letters to shareholders are also about common sense.

Now, if value investing makes sense and if it works, why are there so few value investors? The late Bill Ruane figured out that only about 5% of professionally managed money in the U.S. was invested on a value basis. So why so few? The answer is mostly psychological. If you’re a value investor, you’re a long-term investor, so by definition you don’t try to keep up with your peers or with the benchmark in the short-term. So you know in advance that every now and then, you will lag.

10 Jul 2009 First Eagle Funds - Investor Insight
One of the things that Jean-Marie Eveillard firmly ingrained in the culture here is that the future is uncertain. That results in investing with not only a price margin of safety, but in conservative balance sheets and alongside prudent and proven management teams. If you acknowledge your crystal ball is at best foggy, you follow the advice of Ben Graham and invest to avoid the landmines.

In terms of flexibility, we’ve been willing to be out of the biggest sectors of the market, whether it was Japan in the late 1980s, technology in the late 1990s or financials the late 2000s. That wasn’t necessarily because of any particular gift of foresight, but reflected a recognition that each of those areas embodied very widely accepted and high expectations. It’s painful and not socially acceptable to be out of the most revered sectors of the market, but those types of acts of omission have been a key contributor to the strong performance.

In addition to humility and flexibility, the third thing in terms of temperament we think we value more than most other investors is patience. We have a five year average holding period. Particularly in a volatile market like today’s, people are trying to zig and zag ahead of every market turn that they’re hoping they can forecast with scientific precision. We like to plant seeds and then watch the trees grow, and our portfolio is often kind of a portrait of inactivity. That’s kept us from making sharp and sometimes emotional moves that we eventually come to regret.

The compression of time horizons and the increased trading done by algorithm creates more liquidity for us to take long-term positions. That lowers the cost, at the margin, of our entering or exiting a long-term position. More generally, the more compressed the time horizon of the market is, the less the market is willing to pay for a business’ “muddle-through” value, which we base on looking at peak and trough margins and normal business cycles. We look at earnings power three, four and five years out the less we have to pay for that, the more our patience pays off...

17 Jun 2009 Views on the Economic Crisis - Jean-Marie Eveillard
...in 2006 residential real estate prices began to decline. Not because the U.S. was in a recession, not because interest rates were too high, but it was simply a matter that the last individual with no income, no job and no assets was provided a mortgage with no money down. And, as residential real estate prices began to decline, the credit cycle turned and the deleveraging in the financial sector and in the consumer sector began.

Now, the authorities were kind of slow in noticing that we were at the beginning of a major financial crisis. Indeed, Mr. Bernanke, the Chairman of the Fed, in late 2005 or 2006, publicly said that residential real estate in the U.S. was not in a bubble at all, and residential real estate prices had gone up because of the inherent strength of the American economy. When somebody at a high level says something truly stupid, you have to wonder whether he's just being stupid or whether he's lying through his teeth. He knows that there is a bubble, but he doesn't want to say so for political reasons or to not dent the confidence of the public. So, most of the time, those people in high places, it’s not that they are stupid, but they are acting in bad faith.

And indeed, Larry Summers in 2005 at the summer meeting, which the Fed organizes in Jackson Hole, Wyoming, a lesser known economist presented a paper that said there was trouble brewing and that a financial crisis might be around the corner. Larry Summers immediately ridiculed the poor fellow. So, neither Mr. Bernanke nor Mr. Summers saw the crisis coming.

What does that mean for the stock market in the U.S. and the rest of the world? People who were selling stocks in the U.S. in February either were panicking or believed that the deleveraging taking place would ultimately cause genuine deflation, because deflation is a killer for stocks.

I always thought that the odds of deflation being the ultimate outcome were extremely low. In 2002 Mr. Bernanke wrote a paper on avoiding deflation, which he thought was a danger in 2002, even though it was not. He was repeating what Milton Friedman said before, that in a pure paper money system you can always bypass the banks. Friedman used the metaphor of the helicopter whereby raining $100 bills on the population. There is no doubt that the $100 bills would be used to spend on a variety of things.

Monetary policy could result in what they call “pushing on a string”. Even if additional liquidity is provided to the banks, the banks refuse to lend because they’re shaking in their boots; or if the banks are willing to lend, the consumers and corporations, also shaking in their boots, and are unwilling to borrow. So, you end up pushing on the string and deflation proceeds in spite of the Fed providing extra liquidity.

It's true that in a pure paper money system with no constraints you can always arrest deflation; create inflation by increasing nominal spending. As I said before, inflation is bad but deflation is worse, so the authorities will always choose inflation.

I do not believe that deflation would be a problem with the stimulus in place, and if necessary, there will be more stimulus put in place. The current stimulus is enough so that the economy will stabilize and start recovering. Some people say stocks are not as cheap as they were in 1974 and 1982, which is admittedly true, but at the same time, there is much less competition today from cash and treasury bonds than there was then. If I owned treasury notes or bond, I wouldn't sleep too well at night. To some extent they are an accident waiting to happen.

24 Feb 2009 Video: Eveillard Favors Costco, Tiffany, Japan Multinationals
Jean-Marie Eveillard of First Eagle Funds, talks to Bloomberg's Betty Liu about his preference for Costco Wholesale Corp., Tiffany & Co. and Japanese multinational stocks.