Thornburg Value Q1 2015
Content
APRIL 2015
1st Quarter 2015 Portfolio Manager Market Commentary
Thornburg Value Fund
Value Fund Performance
A shares, as of March 31, 2015
1-YR
3-YR
5-YR
10-YR
SINCE
INCEP
Without sales charge
12.53% 15.32%
9.93%
7.49% 10.06%
8.92%
6.99%
9.80%
12.73% 16.11% 14.47%
8.01%
8.73%
With sales charge
7.47% 13.57%
S&P 500 Index
Connor Browne, cfa
Portfolio Manager
Robert MacDonald, cfa
Portfolio Manager
Celebrating Nearly 20 Years
Periods over one year are annualized. Inception of the A
shares is 10/2/95.
Performance data shown represents past
performance and is no guarantee of future
results. Investment return and principal value
will fluctuate so shares, when redeemed,
may be worth more or less than their original
cost. Current performance may be lower
or higher than quoted. For performance
current to the most recent month end, visit
thornburg.com or call 877-215-1330. The
maximum sales charge for the Fund’s A
shares is 4.50%. The total annual fund operating expense for A shares is 1.37%.
We’re pleased to write that for the quarter ended March 31, 2015, the Thornburg
Value Fund outperformed the benchmark S&P 500 Index, returning 3.47% (for the A
shares without the sales charge), versus the index’s 0.95%. In October, the Value Fund
will celebrate its 20th anniversary (hard for us to believe!), and we’ll use the time up
to that point to highlight some encouraging performance metrics.*
Some of you may remember that we experienced about a year and a half of relatively weak performance between December 31, 2010, and June 30, 2012, during the
a ftermath of the financial crisis. One of the things that characterized that rough
patch was increased volatility: for the life of the fund up to that point, raw beta (calculated weekly) had been 0.94, meaning that the fund was slightly less volatile than
the market. During that same extended period (October 1995 through December
31, 2010), the fund returned 10.1% on an annual basis, versus 7.1% for the S&P 500
Index. For that long stretch, the fund outperformed the market, with lower volatility.
During the year and a half of underperformance, volatility jumped; beta was at 1.22;
annualized total return was a negative 8.9% (as shown in the table on the following
page) versus the S&P 500 Index’s positive 7.7%.
But we took action to correct course. We bolstered the consistent earning characteristics of the portfolio and took other actions to reduce volatility. Since then, beta has
returned, at 0.95, to its historic average. Returns are even more competitive. For the
up-market period since June 30, 2012, your fund has returned 23.1% on an average
annual basis, while the index has returned 18.9%. So your fund has significantly outperformed the broader market, with less volatility, during one of the strongest rally
periods in recent memory. And we believe our efforts at risk management have paid
off—that we have positioned the portfolio to have the potential to outperform during
whatever market upcycles remain on the near horizon—while exposing shareholders
to less downside risk.
*All return numbers cited below are for A shares without sales charge.
2 | Value Fund
Value Fund Historical Performance Statistics
10/2/95–12/31/10
12/31/2010–6/30/12
6/30/12–3/31/15
0.94
1.22
0.95
Value Fund Total Return, Annualized
(A Shares without sales charge)
10.1%
-8.9%
23.1%
S&P 500 Total Return, Annualized
7.1%
7.7%
18.9%
Value Fund Total Return, Cumulative
(A Shares without sales charge)
332.8%
-12.9%
77%
S&P 500 Total Return, Cumulative
183.5%
11.8%
60.9%
Value Fund Beta (weekly)
Source: Thornburg and Bloomberg.
Past performance does not guarantee future results. If the sales charge had been deducted, returns would be lower.
Semi-Literary Asset-Management
Parallels
William Thorndike Jr’s 2012 book, The
Outsiders,1 profiles eight market-beating CEOs and the characteristics that
set them apart from their peers. Many
of those characteristics can be used to
describe key tenants of Thornburg’s investment philosophy and approach.
Among us investment types, the book
is, in Derek Zoolander’s words, “so hot
right now.” It’s a good read, and we
recommend it.
Foxes versus Hedgehogs
Thorndike draws a distinction between
managers who are like foxes, with
well-rounded knowledge bases, and managers who are like hedgehogs, experts in
a narrow field. All of his “outsider CEOs”
are foxes. Thornburg’s global-generalist
approach aims to train us each as foxes, in stark contrast to how many of our
competitors operate (as sector specialists
working in silos). In our work as analysts,
associate portfolio managers, and portfolio managers, we conduct bottom-up,
fundamental research on a wide variety
of types of companies doing business
all over the world. Thorndike asserts
that his fox CEOs “had familiarity with
other companies and industries and
disciplines, and this ranginess translated into new perspectives, which
in turn helped them to develop new
approaches that eventually translated into
exceptional results.”
We believe a global generalist approach,
where each of us is trained like a fox and
not a hedgehog, gives us a sustainable
competitive advantage. Thorndike writes
on Warren Buffett:
Buffett…by virtue of his prior experience evaluating investments in a wide
variety of securities and industries,
was a classic fox, and had the advantage of choosing from a much wider
menu of allocation options… Simply
put, the more investment options a
CEO has, the more likely he or she
is to make high-return decisions, and
this broader palate has translated into
a significant competitive advantage
for Berkshire.
—William Thorndike Jr., 2012,
The Outsiders
The latitude and discretion our portfolio
managers use in the management of our
strategies allow us to best take advantage
of the global generalist approach. Not
only does this flexibility create an environment that allows better comparison
between investment opportunities, it
also widens the available universe of investable securities.
Far from The Noise of Wall Street
Describing his outsider CEOs, Thorndike writes, “Interestingly, their iconoclasm was reinforced in many cases by
geography. For the most part, their operations were located in cities…removed
from the financial epicenter of the Bos-
ton/New York corridor. This distance
helped insulate them from the din of
Wall Street conventional wisdom.”
Thornburg’s location in Santa Fe, New
Mexico, is conducive to bold, high-conviction investing, especially when our
ideas are contrarian. Our private structure allows our focus to remain on our
investors’ outcomes, rather than the
quarterly game of giving and hitting
earnings guidance as an organization.
If we do well by our investors over the
long term, our own financial rewards
will follow.
“Independent thinking is essential to
long-term success and interactions with
outside advisers (Wall Street, the press,
etc.) can be distracting and time-consuming,” writes Thorndike.
Revisiting Inflation and the
Strong Dollar
In our third-quarter 2014 commentary,
we discussed the relationships between
inflationary
growth
environments,
non-inflationary growth environments,
and p/e multiple expansion of the market.
Why revisit the topic? Because valuations
in the United States really are about inflation expectations—and a strong dollar.
Let’s take a look at the dollar component
of this relationship; strong-dollar periods
correlate closely with higher multiples.
The greater than 3% rise in the
trade-weighted dollar in 2013 played a
role in keeping inflation pressures at bay
and contributed, we believe, to multiple expansion in 2014. With the monetary expansion in Japan, the end of the
Fed’s stimulus in the United States,
European Central Bank monetary
expansion, and weakness in emergingmarkets-sensitive currencies, we might
expect continued dollar strength in
the coming months and years, which
could lead to further U.S.-market multiple expansion.
Together, the yen, the euro, and emerging market–sensitive currencies—each
of which may weaken further—account
for more than 88% of the trade-weighted
Does a Stronger Dollar Bring Higher Multiples?
118
U.S. Trade-Weighted Dollar Index
S&P 500 P/E
21
113
19
17
108
15
103
13
98
11
93
flix’s shares to our advantage, with a trim
on strength and an add on weakness over
the last year. During the quarter, Netflix
reported strong quarterly results for its
reporting period ending December 31st.
While the stock moves significantly on
quarterly earnings reports, we believe
the long-term structural nature of their
advantage in over–the-top television content distribution is underappreciated by
the market.
9
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Cornerstone Macro
dollar index. A glance at the chart above
shows the strong correlation between the
dollar and multiple expansion.
So again, we are not prognosticators and
attempt to position the portfolio to have
the potential to perform well in any environment, but we do believe that the environment for U.S. equities continues to be
benign. Below, we’ll take a look at three
holdings that drove performance most,
both on the positive side and on the negative side.
Portfolio Performance
During the quarter, strong fund performance was driven by both our stock
selection and our relative allocation to
sectors. Sector allocation aided fund
performance in every sector during the
quarter, with the strongest contribution
from our overweight exposure to health
care stocks. Stock selection effect was
TOP 10 HOLDINGS AS OF 2/28/15
Thermo Fisher Scientific, Inc.
4.0%
Gilead Sciences, Inc.
3.5%
JPMorgan Chase & Co.
3.2%
Express Scripts Holding Company
2.9%
Phibro Animal Health Corp.
2.5%
Mead Johnson Nutrition Co.
2.4%
Target Corp.
2.4%
IMS Health Holdings, Inc.
2.3%
Aramark Holdings Corp.
2.3%
Mondelez International, Inc.
2.1%
particularly strong within the consumer
discretionary and financials sectors. Our
stock picking was worse in the health
care, telecom and materials sectors.
Top Contributors to Performance
Amazon was our top performer for the
quarter; the company struggled in 2014
as management actions and earnings reports over the course of the year dampened expectations that we might ever
see profits at the company. This year has
been different, and happily, management has seemed to reverse course a bit
on this issue with recent indications that
they will break out more financial details
about its Amazon web services business.
We’ve long believed that there are mature, profitable businesses hiding within
the fast growing behemoth. We may get
more tangible details soon.
Phibro Animal Health was our second
largest contributor for the quarter. Phibro
is a family owned animal health business
based in Teaneck, New Jersey. Its management team has executed well since we
initiated our position in early 2014. The
animal health space has further garnered
interest following activist involvement in
market leader Zoetis, a peer company to
Phibro.
Netflix has been a volatile holding since
we initiated a position in May of 2014.
So far, we have used the volatility in Net-
Top Detractors from Performance
Since our initial investment in Horsehead
Holdings in January of 2014, the stock
had declined nearly 20% through the end
of the first quarter against an almost 20%
gain for the broader market. Not a good
start! That said, we remain very excited
about the prospects for Horsehead. Based
in Pittsburgh, the company collects the
dust remnants from producing steel in
electric arc furnaces and turns it into zinc
and related products. They have invested substantially in a new plant in North
Carolina that should dramatically improve profitability per pound of finished
product. So far, management has had
trouble getting the plant running at full
capacity. We’ve spent many hours talking
with management and other experts
within the industry, and we think it’s a
matter of when, not if. Once Horsehead’s
new plant is up and running, the stock’s
current discount to our calculation of intrinsic value should diminish.
Marin Software is a small current holding; even so it has been a tough one for
us so far. Generally speaking, we believe
management has executed and that the
company’s management tools for online
advertising serve an important and growing role as advertising dollars move online. So far, Marin has been painted with
the broad brush of a very competitive advertising technology space. We, however,
view Marin differently.
Perrigo was a good stock for the fund
overall; though it was weak during the
first quarter. Our initial investment was
well timed, during a swoon in the shares
in 2014. The stock regained ground rel-
4 | Value Fund
atively quickly. Especially because we
view the company as a consistent earner,
some volatility within different operating
divisions caused us to sell our stock just
below our price target. We should have
held on—since the end of the quarter
(and our sale) Mylan Pharmaceuticals
has made an offer to acquire Perrigo at
a significant premium to our sale price.
Repeating Our Mantra
As always, we attempt to manage the
portfolio such that shareholders can participate in market upcyles but benefit
from responsible risk mitigation on the
downside. The three-basket diversification construct that we have employed
since the fund’s inception nearly 20
years ago is central to that effort and is
a component of a portfolio construction
process that has remained f undamentally
unchanged for the life of your fund.
Thank you for investing alongside us in
the Thornburg Value Fund. n
1. Thorndike Jr., William N. 2012. The Outsiders.
Massachusetts. Harvard Business Press.
Important Information
Investments in the Fund carry risks, including possible loss of principal. Special risks may be associated with investments outside the United States, especially in emerging markets,
including currency fluctuations, illiquidity and volatility, and political and economic risk. Investments in small capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.
The views expressed by the portfolio managers reflect their professional opinions and are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.
There is no guarantee the Fund will meet its objectives.
Any securities, countries, and sectors mentioned are for informational purposes only. Portfolio holdings are subject to change daily. Under no circumstances does the information
contained within represent a recommendation to buy or sell securities. Notable purchases and sales include material transactions other than recently purchased securities, which
may be excluded for best execution purposes.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains and there is no assurance that the Fund will have
continued access to profitable IPOs. As Fund assets grow, the impact of IPO investments on performance may decline.
Beta is a measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Multiple is a valuation multiple reflects an investment’s market value relative to some key metric. Price to earnings ratio (P/E) is a commonly used multiple. It’s calculated by
dividing a stock’s price by the company’s earnings per share.
The trade-weighted U.S. dollar index, also known as the broad index, is a measure of the value of the United States dollar relative to other world currencies. Its numerical
value is determined as a weighted average of the price of various currencies relative to the dollar.
The S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges.
The performance of any index is not indicative of the performance of any particular investment. Keep in mind that indices do not take into account any fees and expenses of
the individual investments that they track. You cannot make an investment in any index.
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read them carefully before investing.
Thornburg Securities Corporation, Distributor | 2300 North Ridgetop Road | Santa Fe, New Mexico 87506 | 877.215.1330
4/16/15
TH1758
1st Quarter 2015 Portfolio Manager Market Commentary
Thornburg Value Fund
Value Fund Performance
A shares, as of March 31, 2015
1-YR
3-YR
5-YR
10-YR
SINCE
INCEP
Without sales charge
12.53% 15.32%
9.93%
7.49% 10.06%
8.92%
6.99%
9.80%
12.73% 16.11% 14.47%
8.01%
8.73%
With sales charge
7.47% 13.57%
S&P 500 Index
Connor Browne, cfa
Portfolio Manager
Robert MacDonald, cfa
Portfolio Manager
Celebrating Nearly 20 Years
Periods over one year are annualized. Inception of the A
shares is 10/2/95.
Performance data shown represents past
performance and is no guarantee of future
results. Investment return and principal value
will fluctuate so shares, when redeemed,
may be worth more or less than their original
cost. Current performance may be lower
or higher than quoted. For performance
current to the most recent month end, visit
thornburg.com or call 877-215-1330. The
maximum sales charge for the Fund’s A
shares is 4.50%. The total annual fund operating expense for A shares is 1.37%.
We’re pleased to write that for the quarter ended March 31, 2015, the Thornburg
Value Fund outperformed the benchmark S&P 500 Index, returning 3.47% (for the A
shares without the sales charge), versus the index’s 0.95%. In October, the Value Fund
will celebrate its 20th anniversary (hard for us to believe!), and we’ll use the time up
to that point to highlight some encouraging performance metrics.*
Some of you may remember that we experienced about a year and a half of relatively weak performance between December 31, 2010, and June 30, 2012, during the
a ftermath of the financial crisis. One of the things that characterized that rough
patch was increased volatility: for the life of the fund up to that point, raw beta (calculated weekly) had been 0.94, meaning that the fund was slightly less volatile than
the market. During that same extended period (October 1995 through December
31, 2010), the fund returned 10.1% on an annual basis, versus 7.1% for the S&P 500
Index. For that long stretch, the fund outperformed the market, with lower volatility.
During the year and a half of underperformance, volatility jumped; beta was at 1.22;
annualized total return was a negative 8.9% (as shown in the table on the following
page) versus the S&P 500 Index’s positive 7.7%.
But we took action to correct course. We bolstered the consistent earning characteristics of the portfolio and took other actions to reduce volatility. Since then, beta has
returned, at 0.95, to its historic average. Returns are even more competitive. For the
up-market period since June 30, 2012, your fund has returned 23.1% on an average
annual basis, while the index has returned 18.9%. So your fund has significantly outperformed the broader market, with less volatility, during one of the strongest rally
periods in recent memory. And we believe our efforts at risk management have paid
off—that we have positioned the portfolio to have the potential to outperform during
whatever market upcycles remain on the near horizon—while exposing shareholders
to less downside risk.
*All return numbers cited below are for A shares without sales charge.
2 | Value Fund
Value Fund Historical Performance Statistics
10/2/95–12/31/10
12/31/2010–6/30/12
6/30/12–3/31/15
0.94
1.22
0.95
Value Fund Total Return, Annualized
(A Shares without sales charge)
10.1%
-8.9%
23.1%
S&P 500 Total Return, Annualized
7.1%
7.7%
18.9%
Value Fund Total Return, Cumulative
(A Shares without sales charge)
332.8%
-12.9%
77%
S&P 500 Total Return, Cumulative
183.5%
11.8%
60.9%
Value Fund Beta (weekly)
Source: Thornburg and Bloomberg.
Past performance does not guarantee future results. If the sales charge had been deducted, returns would be lower.
Semi-Literary Asset-Management
Parallels
William Thorndike Jr’s 2012 book, The
Outsiders,1 profiles eight market-beating CEOs and the characteristics that
set them apart from their peers. Many
of those characteristics can be used to
describe key tenants of Thornburg’s investment philosophy and approach.
Among us investment types, the book
is, in Derek Zoolander’s words, “so hot
right now.” It’s a good read, and we
recommend it.
Foxes versus Hedgehogs
Thorndike draws a distinction between
managers who are like foxes, with
well-rounded knowledge bases, and managers who are like hedgehogs, experts in
a narrow field. All of his “outsider CEOs”
are foxes. Thornburg’s global-generalist
approach aims to train us each as foxes, in stark contrast to how many of our
competitors operate (as sector specialists
working in silos). In our work as analysts,
associate portfolio managers, and portfolio managers, we conduct bottom-up,
fundamental research on a wide variety
of types of companies doing business
all over the world. Thorndike asserts
that his fox CEOs “had familiarity with
other companies and industries and
disciplines, and this ranginess translated into new perspectives, which
in turn helped them to develop new
approaches that eventually translated into
exceptional results.”
We believe a global generalist approach,
where each of us is trained like a fox and
not a hedgehog, gives us a sustainable
competitive advantage. Thorndike writes
on Warren Buffett:
Buffett…by virtue of his prior experience evaluating investments in a wide
variety of securities and industries,
was a classic fox, and had the advantage of choosing from a much wider
menu of allocation options… Simply
put, the more investment options a
CEO has, the more likely he or she
is to make high-return decisions, and
this broader palate has translated into
a significant competitive advantage
for Berkshire.
—William Thorndike Jr., 2012,
The Outsiders
The latitude and discretion our portfolio
managers use in the management of our
strategies allow us to best take advantage
of the global generalist approach. Not
only does this flexibility create an environment that allows better comparison
between investment opportunities, it
also widens the available universe of investable securities.
Far from The Noise of Wall Street
Describing his outsider CEOs, Thorndike writes, “Interestingly, their iconoclasm was reinforced in many cases by
geography. For the most part, their operations were located in cities…removed
from the financial epicenter of the Bos-
ton/New York corridor. This distance
helped insulate them from the din of
Wall Street conventional wisdom.”
Thornburg’s location in Santa Fe, New
Mexico, is conducive to bold, high-conviction investing, especially when our
ideas are contrarian. Our private structure allows our focus to remain on our
investors’ outcomes, rather than the
quarterly game of giving and hitting
earnings guidance as an organization.
If we do well by our investors over the
long term, our own financial rewards
will follow.
“Independent thinking is essential to
long-term success and interactions with
outside advisers (Wall Street, the press,
etc.) can be distracting and time-consuming,” writes Thorndike.
Revisiting Inflation and the
Strong Dollar
In our third-quarter 2014 commentary,
we discussed the relationships between
inflationary
growth
environments,
non-inflationary growth environments,
and p/e multiple expansion of the market.
Why revisit the topic? Because valuations
in the United States really are about inflation expectations—and a strong dollar.
Let’s take a look at the dollar component
of this relationship; strong-dollar periods
correlate closely with higher multiples.
The greater than 3% rise in the
trade-weighted dollar in 2013 played a
role in keeping inflation pressures at bay
and contributed, we believe, to multiple expansion in 2014. With the monetary expansion in Japan, the end of the
Fed’s stimulus in the United States,
European Central Bank monetary
expansion, and weakness in emergingmarkets-sensitive currencies, we might
expect continued dollar strength in
the coming months and years, which
could lead to further U.S.-market multiple expansion.
Together, the yen, the euro, and emerging market–sensitive currencies—each
of which may weaken further—account
for more than 88% of the trade-weighted
Does a Stronger Dollar Bring Higher Multiples?
118
U.S. Trade-Weighted Dollar Index
S&P 500 P/E
21
113
19
17
108
15
103
13
98
11
93
flix’s shares to our advantage, with a trim
on strength and an add on weakness over
the last year. During the quarter, Netflix
reported strong quarterly results for its
reporting period ending December 31st.
While the stock moves significantly on
quarterly earnings reports, we believe
the long-term structural nature of their
advantage in over–the-top television content distribution is underappreciated by
the market.
9
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Cornerstone Macro
dollar index. A glance at the chart above
shows the strong correlation between the
dollar and multiple expansion.
So again, we are not prognosticators and
attempt to position the portfolio to have
the potential to perform well in any environment, but we do believe that the environment for U.S. equities continues to be
benign. Below, we’ll take a look at three
holdings that drove performance most,
both on the positive side and on the negative side.
Portfolio Performance
During the quarter, strong fund performance was driven by both our stock
selection and our relative allocation to
sectors. Sector allocation aided fund
performance in every sector during the
quarter, with the strongest contribution
from our overweight exposure to health
care stocks. Stock selection effect was
TOP 10 HOLDINGS AS OF 2/28/15
Thermo Fisher Scientific, Inc.
4.0%
Gilead Sciences, Inc.
3.5%
JPMorgan Chase & Co.
3.2%
Express Scripts Holding Company
2.9%
Phibro Animal Health Corp.
2.5%
Mead Johnson Nutrition Co.
2.4%
Target Corp.
2.4%
IMS Health Holdings, Inc.
2.3%
Aramark Holdings Corp.
2.3%
Mondelez International, Inc.
2.1%
particularly strong within the consumer
discretionary and financials sectors. Our
stock picking was worse in the health
care, telecom and materials sectors.
Top Contributors to Performance
Amazon was our top performer for the
quarter; the company struggled in 2014
as management actions and earnings reports over the course of the year dampened expectations that we might ever
see profits at the company. This year has
been different, and happily, management has seemed to reverse course a bit
on this issue with recent indications that
they will break out more financial details
about its Amazon web services business.
We’ve long believed that there are mature, profitable businesses hiding within
the fast growing behemoth. We may get
more tangible details soon.
Phibro Animal Health was our second
largest contributor for the quarter. Phibro
is a family owned animal health business
based in Teaneck, New Jersey. Its management team has executed well since we
initiated our position in early 2014. The
animal health space has further garnered
interest following activist involvement in
market leader Zoetis, a peer company to
Phibro.
Netflix has been a volatile holding since
we initiated a position in May of 2014.
So far, we have used the volatility in Net-
Top Detractors from Performance
Since our initial investment in Horsehead
Holdings in January of 2014, the stock
had declined nearly 20% through the end
of the first quarter against an almost 20%
gain for the broader market. Not a good
start! That said, we remain very excited
about the prospects for Horsehead. Based
in Pittsburgh, the company collects the
dust remnants from producing steel in
electric arc furnaces and turns it into zinc
and related products. They have invested substantially in a new plant in North
Carolina that should dramatically improve profitability per pound of finished
product. So far, management has had
trouble getting the plant running at full
capacity. We’ve spent many hours talking
with management and other experts
within the industry, and we think it’s a
matter of when, not if. Once Horsehead’s
new plant is up and running, the stock’s
current discount to our calculation of intrinsic value should diminish.
Marin Software is a small current holding; even so it has been a tough one for
us so far. Generally speaking, we believe
management has executed and that the
company’s management tools for online
advertising serve an important and growing role as advertising dollars move online. So far, Marin has been painted with
the broad brush of a very competitive advertising technology space. We, however,
view Marin differently.
Perrigo was a good stock for the fund
overall; though it was weak during the
first quarter. Our initial investment was
well timed, during a swoon in the shares
in 2014. The stock regained ground rel-
4 | Value Fund
atively quickly. Especially because we
view the company as a consistent earner,
some volatility within different operating
divisions caused us to sell our stock just
below our price target. We should have
held on—since the end of the quarter
(and our sale) Mylan Pharmaceuticals
has made an offer to acquire Perrigo at
a significant premium to our sale price.
Repeating Our Mantra
As always, we attempt to manage the
portfolio such that shareholders can participate in market upcyles but benefit
from responsible risk mitigation on the
downside. The three-basket diversification construct that we have employed
since the fund’s inception nearly 20
years ago is central to that effort and is
a component of a portfolio construction
process that has remained f undamentally
unchanged for the life of your fund.
Thank you for investing alongside us in
the Thornburg Value Fund. n
1. Thorndike Jr., William N. 2012. The Outsiders.
Massachusetts. Harvard Business Press.
Important Information
Investments in the Fund carry risks, including possible loss of principal. Special risks may be associated with investments outside the United States, especially in emerging markets,
including currency fluctuations, illiquidity and volatility, and political and economic risk. Investments in small capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.
The views expressed by the portfolio managers reflect their professional opinions and are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.
There is no guarantee the Fund will meet its objectives.
Any securities, countries, and sectors mentioned are for informational purposes only. Portfolio holdings are subject to change daily. Under no circumstances does the information
contained within represent a recommendation to buy or sell securities. Notable purchases and sales include material transactions other than recently purchased securities, which
may be excluded for best execution purposes.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains and there is no assurance that the Fund will have
continued access to profitable IPOs. As Fund assets grow, the impact of IPO investments on performance may decline.
Beta is a measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Multiple is a valuation multiple reflects an investment’s market value relative to some key metric. Price to earnings ratio (P/E) is a commonly used multiple. It’s calculated by
dividing a stock’s price by the company’s earnings per share.
The trade-weighted U.S. dollar index, also known as the broad index, is a measure of the value of the United States dollar relative to other world currencies. Its numerical
value is determined as a weighted average of the price of various currencies relative to the dollar.
The S&P 500 Index, an unmanaged broad measure of the U.S. stock market, does not reflect sales charges.
The performance of any index is not indicative of the performance of any particular investment. Keep in mind that indices do not take into account any fees and expenses of
the individual investments that they track. You cannot make an investment in any index.
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read them carefully before investing.
Thornburg Securities Corporation, Distributor | 2300 North Ridgetop Road | Santa Fe, New Mexico 87506 | 877.215.1330
4/16/15
TH1758
