Episode summary
We Asked a $17B International Manager Why Value is Winning Again — and What the S&P 500 Leaves Out
Excess Returns
· · 1 hr 3 min · Hosts: Justin Carbonneau, Jack Forehand · Guests: Colin McQueen
Summary
Colin McQueen describes how his value investing style evolved from classic deep value toward a broader approach that also embraces quality businesses, restructuring opportunities, and a more explicit risk framework. He says his early career in UK value taught emotional resilience, while later work showed him that intangible assets and quality compounding businesses deserved a place in the value toolkit.
A major theme is that the long headwinds for value in the 2010s were tied to low rates, deflation, weak recoveries outside the US, and the dominance of intangible-heavy growth stocks. McQueen argues the regime has shifted: inflation, higher rates, infrastructure spending, reshoring, defense, energy transition, and AI-related capital spending have improved the opportunity set for tangible businesses and financials, especially outside the US.
He is constructive on parts of Asia, especially Korea and selected Japanese and Chinese opportunities, but remains selective and valuation-driven. Free cash flow is still the anchor, and he uses a valuation-based risk dashboard, diversification, and even AI tools to test theses and avoid becoming too stubborn when a thesis stops working.
Key takeaways
- McQueen says value investing works best when what is out of favor is “really, really out of favor,” and he uses valuation spreads to judge when to lean in.
- He thinks higher rates and inflation have leveled the playing field for value, especially for financials and tangible-capital businesses.
- He says about 60% of the stocks he buys have a restructuring angle, with Japan, Korea, and turnaround situations offering some of the best opportunities.
- McQueen sees AI as both an opportunity and a source of uncertainty: about 14% to 15% of international stocks are tied to the AI supply chain, but the real winners are still being discovered.
- He prefers a 100 to 150 stock portfolio because it helps manage factor risk and makes use of T. Rowe Price’s broader research platform.
Notable quotes
“I kind of think of three sort of lessons that sort of shaped shaped how I got to where I am today and and how I sort of think about value investing”
“we sort of went into a kind of almost perma deflationary environment”
“it has changed the game probably I I guess I think of it not necessarily as tilting things in value's favor, but sort of just leveling the playing field a little bit more”
“about 14 15% of the stocks in the international market that are kind of connected into the AI supply chain”
“probably about 60% of the stocks we buy have a restructuring angle”
How the episode opens
Hi Colin, welcome to Excess Returns. — Hi, great. Thank you. Pleasure to be here.
You are a portfolio manager at T-roll prices global equity division where you spend your time looking for investment opportunities around the world, not just outside the US. Um so we're looking forward to a discussion today around value investing where you're seeing opportunities your process and also I think you know it's going to be an interesting discussion with you about how value investing has evolved in your career and over your career and so I think that's maybe where we can start. I mean, international value stocks have had a really good recent run.
Um, but the preceding stretch to this recent performance was one of the worst periods for value since the 1930s. And I think we'd like to kind of start there with you sort of what that stretch sort of taught you and what what has changed and how you kind of think of it in the context of your career in in value investing.
Okay. Uh, thanks Justin. Um, yeah, maybe it helps.
I'll just sort of back up a little bit. Um, because I guess for me I I kind of think of three sort of lessons that sort of shaped shaped how I got to where I am today and and how I sort of think about value investing. So I started my career in 1989.
Uh, started a firm called Philillips and Drew Fund Management. Um, which vanished into UBS uh, in the distant past. Uh but it was basically it was synonymous with value investing in the UK.
Um and the firm was very much a sort of deep value investor. I mean our our sort of motto to put it into American was we fish into the in the garbage cans for the things that other people have thrown out.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- international value
- higher interest rates
- free cash flow valuation
- ai supply chain
- corporate governance reform
Companies and tickers mentioned
- TROW
- T. Rowe Price
- Samsung
- Hitachi
- Rolls-Royce
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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