Tweedy Browne: Finding The Best Value Investing Opportunities
Let’s be honest – the current U.S market is obsessed with AI hype and nosebleed valuations. Yet while others chase momentum, Tweedy Browne’s Thomas Shrager and Jay Hill keep their feet firmly planted in value investing’s time-tested principles. Their strategy cuts through the noise: uncover fundamentally sound companies trading at sensible prices, then let the magic of compounding work.
“The most important finding is that stocks outside the United States are significantly cheaper,” says Jay Hill. He highlights the unsustainable fiscal policies driving U.S. market outperformance: “Between 2021 and 2024, the average U.S. budget deficit was about 8% of GDP. This has contributed to faster corporate earnings growth. But this is not sustainable in the long term.” For Tweedy Browne, the real bargains lie elsewhere.
Hill points to the U.K. as a prime example: “The UK stock market is valued at an average price-to-earnings ratio of 13, while the U.S. P/E ratio is almost 24. In 46 of the last 47 months, UK equity funds have experienced outflows—meaning large-scale forced selling.” This disconnect creates opportunity. “Where are you more likely to find a bargain: in the U.S., where constant passive inflows keep pushing valuations higher, or in the UK? I prefer the latter market.”
Shrager echoes this caution on U.S. valuations: “The price you pay for stocks is crucial for long-term performance. The U.S. budget deficit is unsustainable, and interest rates are rising. Import tariffs are not conducive to economic growth.” He sees better value in Europe and Japan, where fiscal policies still support economies without extreme valuations.
One of Tweedy Browne’s standout picks is Johnson Service Group (JSG), a U.K.-based industrial laundry company. Hill explains: “JSG is the British equivalent of Cintas. But while Cintas is valued at a P/E of 50, JSG trades at just 12 times earnings.” The company’s strong market position and insider buying make it compelling: “The workwear segment is a duopoly, with Johnson and Elis controlling over 80% of the UK market.”
Shrager also highlights opportunities in Asia, such as Hana Financial Group in Korea: “We bought at a price level that corresponded to about 20% of book value; today the stock is trading at about 50% of book value. The dividend yield is 7%, and the P/E ratio is about 7.” He notes improving fundamentals: “Four years ago, the return on equity was a much too low 4%; today it’s already at 8%. I expect it to reach 10% in the next few years.”
Patience is a recurring theme. On Nestlé, Shrager says: “We are patient; the substance is good. Anything that isn’t going well right now can be fixed.” Similarly, with Roche’s new CEO: “Give Schinecker some more time. The most important question is: Will the drug pipeline generate future growth? The answer is yes.”
Even in defense stocks like Rheinmetall and Safran—which have surged—Tweedy Browne stays disciplined. Hill notes: “The shares are expensive, so we’re trimming the position every now and then.” Shrager adds: “We bought Rheinmetall before the war in Ukraine. At that time, the stock market valued it like a pure auto supplier. Over the past three years, we have gradually reduced our position.”
Their take on Berkshire Hathaway reflects their value mindset: “Berkshire has had a great run, but the shares are now fairly valued… Buffett remains chairman. Will he be involved in every detail? Hardly, but he has been gradually stepping back. We’re reducing our position somewhat, but we won’t exit.”
You can read the entire interview here:
Tweedy Browne Interview – The Market