A Focus on Value: Oakmark International Fund Anniversary
David Herro, Portfolio Manager of the Oakmark International Fund, provides commentary marking the strategy’s 25th anniversary
Instead of trying to pick election outcomes or central bank moves, we try to value businesses based on fundamentals.
Value isn't just a style of investing at Harris Associates - it's the only way of investing. David G. Herro, CFA®, Deputy Chairman, Portfolio Manager, and CIO, International Equities at Harris Associates (sub-adviser of the Oakmark International Natixis Funds), has adhered to the same high-conviction investment process since joining the firm 25 years ago. Their consistent, research-driven approach to finding quality companies around the world that can be purchased at a significant discount to their true business value1 has proven to be very effective through the years.
Find value in high-conviction active investing
All portfolio managers at Harris Associates focus on exploiting value where they can find it. That means they often appear to be contrarians. For example, while events like Brexit can cause panic selling, they tend to provide opportunity for those who are patient, long-term investors. In fact, the Harris team used Brexit to actively increase exposure to companies they believed to be quality businesses selling at bargain prices. "No matter the geopolitical landscape, we continually search for and invest with companies that are committed to putting shareholders first and are trading at large discounts to our perception of their true worth," said Herro.
Historically, Harris Associates' high-conviction approach has led to high Active Share,2 meaning their portfolios look significantly different from those of their respective benchmarks. In fact, as of December 31, 2017, the Oakmark International Natixis Funds have an Active Share of 89%. This means that the relative security weights of each portfolio are 89% different from its benchmark - creating strong potential to generate alpha, returns in excess of the benchmark.
1 This investment philosophy is based upon the belief that, over time, a company's stock price converges with Harris Associates' estimate of its intrinsic or true business value. By "true business value", Harris Associates means an estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below their true business value presents the best opportunity to achieve the fund's investment objective.
2 Active Share is a measure of the differentiation of the holdings of a portfolio from the holdings of its appropriate passive benchmark index.