Why a country's love of gambling and booze is good for investors

This week on WealthTrack, a rare interview with a great global investor. Artisan International Funds Mark Yockey explains why his worldwide hunch for growth has lead to big game profits in Japanese Auto Stocks, foreign beer companies and Chinese casinos. Award-winning fund manager Mark Yockey is next on Consuelo Mack WealthTrack. One of the things that you said in the pre-interview was that, you know, that coke and Cognac was a combination in looking at China and you've got looking at your portfolio, you got a fairly sizable position of companies that are in China. What's the coke and Cognac theme that you're following up on? -Well, it's not just the French people that like Cognac although they drink certainly their share. The other people that like Cognac in the world in particular are the Chinese, and they love Cognac and they're drinking it by the gallon. And right now, only about 1 percent of all the alcoholic beverages consumed in China are imported. But Cognac, the biggest part of that, in fact, it's probably 80 or 90 percent of that and it's growing at about 25 percent a year and it's still mainly only consumed on the coast where the big, you know, the big cities that we know-- -Right. -Shanghai and Beijing where those places are located. And now the consumption is started to move in land as the income of the people inside China are growing faster. And so, you know, Pernod Ricard was considered the stock got hammered when they bought Absolute because they paid too much for it and we bought it after that. And now they've been growing at 20 to 25 percent in Asia for the last 5 years and the stock is growing from 40 to 90. And so those are the kinds of things that we look for. -So when you have a stock that's gone from 40 to 90, obviously you're seeing how their business is going as well. And, so, you know, what would make you reduce your holdings in Pernod? -You know, these companies Consuelo are unique assets. There's only one company that dominates Cognac sales in China and it's Pernod. And so for us to sell it, it means it's gonna have to get overvalued-- to significantly overvalue. They just reported their earnings today and they are better than expected and the stock was up 2 or 3 percent in the down market. And you know what? Next year, the Chinese are gonna drink 25 percent more Cognac than they did this year. In the year after that, they're gonna drink 25 percent more again. So these are intrinsic, you know, inherent grow stories that are just wonderful companies. -So another activity that the Chinese love is gambling. And you've been a major investor in some Chinese gambling casinos. -That's a great story when Las Vegas got in trouble after the '08 recession. The banks told the casinos in Las Vegas that they had list their Macau subsidiaries. -So when Macau for instance was one of your holdings-- -When Macau and Sands Macau was forced to go public in Hong Kong and that allowed us to invest them because we're only investing in international companies. -Did you invest them as IPOs or-- -As IPOs-- -You did. Uh-huh. -And then we continue to invest with them for a long time because these companies never existed before in Asia and so people don't know what to do with them. And people didn't really understand the American mentality of gaming either. Because the Las Vegas is much different than the historical Chinese game in the Macau which was kinda pretty low and just gaming no dinners, no entertainment, nothing like that, pretty divvy hotels and the Las Vegas ways, nice hotels, nice restaurants and just making events rather than just going to gamble. And these companies have been moon shots. They've all gone up between 100 to 400 percent since we invested them. -Now, as a result you have pared back your holdings in Sands for instance so I don't know about when. So you've made decisions there based on evaluation. Is that the reason or-- -Based on evaluations and Macau-- just as a historical point of reference. Macau does about 40 billion in gaming reference a year and Las Vegas does 6. -Wow, I had no idea it was that different. -So Macau is 7 times as big as Las Vegas. When we invested on these things when we are doing Research on these things, people will talk about when would Macau become as big as Las Vegas and it's 7 times bigger now. So they've done well and they've gone up a lot and so we've reduced our holdings a little bit. We still own them. We'd love them to come back a little bit and we love to buy back. -So is that also something that you do frequently that you have companies that you've owned, you'll sell when they get overvalued by your standards and then you'll come back and buy them on, you know, debts or down turns or-- -Sure. For some reason or whatever a few months ago Sands and people were nervous about the casinos and Sands went from 35 Hong Kong down to 25 Hong Kong and so we bought a bunch of stock at 25 and now it's almost 40 and so we've reduced our holdings a little bit but it's a great company and really well-positioned to benefit from gaming going forward. -So Baidu is another holding or Chinese holding of yours the search engine-- Chinese search engine. So-- and they've certainly have their ups and downs over the last several years. So what's your current view on Baidu? -I think investors totally misunderstand the story. They're being penalized for just acquiring the Youtube of China. Youtube US is a $4 billion business and growing like a weed. It's gonna-- the Chinese want the same thing as Americans do. They wanna have entertainment. They wanna have a quick look at whatever is popular at the moment and they're being penalized because it's losing money. And the other thing is going out is there's this huge move around the world to mobile searches as opposed to search on your PC. And so right now they're giving it away in China, mobile search. But the way I look at it, the way we look at it is mobile search is even more valuable than search on the PC, because if you do it on your cellphone, it means you probably wanna do something right away, otherwise, you walk in down the street in New York or Kansas City or San Francisco, you hit Yelp or whatever the App is to find a restaurants or to find a hardware store or to find an entire store, whatever you're looking for. And that's the transaction- oriented business. So that search oughta be worth more. Right now they're giving it away. In a few years, mobile search is gonna be 3 times as big as fixed search on your PC. And this hasn't been monetized at all. So, you know what? Personally, I think Baidu is gonna double overtime.