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Exactly.

Are you seeing in your modeling that the international financial sector's getting to the point where you'd possibly nibble, or does it still indicate weakness?

Right now it's really at that pivot point–it's certainly made up quite a bit of ground. Right now, financials as a whole are middle of the pack relative to the other industries. We've seen some emergence of financials. In the short term we've seen a more pronounced rebound within the last week-and-a-half since the first Fed rate cut [on January 22]–financials have certainly been one of the leaders off of that. We have a six-month relative strength in place–it's the best of both worlds, as we say–we're not going to get whipped into short-term head fakes as often. Kind of taking a very, very short-term view here, but even with that, it's certainly moved up to be on average, on pace, so that said–and we did have quite an active underweight–we have been moving towards nibbling, taking some more selective positions as these groups have started to show some strength in the short term right here.

Is there a holding that worked out better than anticipated?

We're not company focused, we're more focused on industries…[however] one of the longer-term holdings and one of the ones that's a perfect segue [from] what we were just talking about within the financials–one that's held up very well and still had very good returns–is the National Bank of Greece. It's been one of the largest holdings and it's also been one of the largest holdings within our European Equity Fund. Within the group–we've been underweight the diversified banks industry for quite some time within this fund–it happens to be the largest industry within the fund and within the benchmark, yet relative to the benchmark, [we] had an underweight position there. This is really showing how we can still capture country themes within industries.

A lot of times when you're looking at the 120 or 130 names within this industry you're going to get some winners, and some losers, and some overpriced names, and some underpriced ones. From a top-level view, things can cancel out a bit, but when you look a little deeper and start looking country by country the banking industry within Greece has certainly been a sweet spot. [It's] had some current short-term volatility within this month, but then, again, who hasn't? But the long-term growth rates on this as forecasted on the Street could be well over 20%, and we're still taking a much more conservative viewpoint on their earnings growth rate; we're looking at them to grow about 16% over the long term here.

What's your sell discipline?

Our sell discipline revolves around our two main metrics: the first is the value-to-price reading. Our guideline is that we're going to sell industries that fall into the bottom decile of our value-to-price reading. So the interpretation of that would be, simply, profit-taking–the prices have moved far beyond where we're estimating the intrinsic value to be in these groups, so we're taking profits there and moving back up to the top of our industry list. The second one is based on relative strength, which is more of an opportunity cost. When we initiated the position we had value in the group, and the market was showing indication that it was recognizing it through a higher relative-strength reading. For one reason or another, relative strength may have deteriorated…and you basically have to cut your losses rather than sitting on the loser month after month.

Who would be the typical investor for this fund?

It's going to come down to their risk-return tolerances and objectives that they have for their portfolio but…if you look at the world now, and certainly this decade, with the stellar overseas returns relative to the U.S., you can't ignore international equities, and the whole stigma of the unknown has really been torn down. If you look at a world benchmark, over half the world's market cap–last time I checked it was 54% or 55%–is outside of the U.S. From an asset allocation perspective, just on size alone, [it indicates] a healthy exposure to the international markets.

Do current market conditions change the international allocation?

We have a global product [at Icon]…and we'll manage the U.S.-international tilt within that; we've been slightly overweight international, to slightly underweight the United States. As value investors we're going to break down our allocation based on valuations. This morning, our value-to-price [VP] reading, (so this is your barometer: when our VPs are high, stocks are really cheap to us and we get excited), the VP for the U.S. is a 1.34, so, in essence, stocks are worth about 34% more than where they're currently trading right now in the U.S. Internationally it's a 1.35, so you've got about value parity across the globe, and it's really almost arguing for a neutral stance.

Senior Editor Kathleen M. McBride writes regularly about mutual funds. She can be reached at [email protected].