H/T to Joe of http://www.valueinvestingworld.com/ for the find.
David is a Portfolio Manager of the Oakmark International fund, the Oakmark International Small Cap fund, the Oakmark Global Select fund, and is Chief Investment Officer of International Equities at Harris Associates. He was named Morningstar’s International-Stock Fund Manager of the Year for 2006; and International-Stock Fund Manager of the Decade for 2000-2009. David has been managing international portfolios since 1986, previously managing an international portfolio for The State of Wisconsin Investment Board. He also served as a Portfolio Manager for international equity portfolios with The Principal Financial Group of Des Moines, Iowa. David, who joined Harris Associates in 1992, has a M.A. in Economics from the University of Wisconsin-Milwaukee (1985) and a B.S. in Business/Economics from the University of Wisconsin-Platteville (1983). He has over twenty-five years of investment experience and is a CFA charterholder.
David was on CNBC recently discussing international investing, in particular Japan and Europe. Below is the video followed by the transcript:
one of the best international fund managers in all the world is david harrow of oak mark international. he turned $10 million investment ten years ago into something more than $22,000 today. not many people have been able to double your money, his money, over the past decade. david, welcome. good to be with you. one of the things that stood out to me as i was doing research on your fund is right now you have 25% or thereabouts of your assets in japan. this is different for you. why japan? and how has the tragedy over there changed, if at all, your thinking about it? why japan? if you look at how and why we invest, we look at businesses that have one of two characteristcharacteristics, or two of two characterists. low in price. high in quality. for decades it was hard to find japanese companies that met those criteria. the late ’80s, japanese stark w stock market trading at five times book value. fast forward, 20 plus years, in a huge stock price implosion in japan. stocks in japan trade up below book value. the market trades at about one times. return on equities are climbing. so the value proposition for japanese equities finally in my 25 years of investing, has opened up. just at a time when no one is interested in japan. how did the tsunami, the earthquake, change the equation, if at all? well, first thing it has done is made those stocks cheaper, because that month japan market dropped roughly 10%. japan was already the cheapest market in the world trading just over one times booked coming into march. coming out of march it dropped another 10% which means a lot of japan was trading well below one times — yours is a classic international fund whi means you can go anywhere all over the globe. one of the things that’s interesting here, you resisted the temptation to go heavily into emerging markets. why? again, it all depends onprice. wro when you look at the alternatives in when we caninvest our clients’ and shareholders’ money it has to be quality at a low price. the problem with emerging markets is not because they’re attractive places with good growth for as far as the eye can see. the problem is price. plus you also have to consider transparency. and the way that corporate functions, emerging — which is not to say you don’t have a play in emerging — you have some direct investments there. a lot of the companies that you are invested in obviously do derive some of their earnings from there. let’s switch and talk a littlebit about europe where so much of the action has been recentlyin terms of the distressed economies in europe. how big an exposure in europe are you overweight, underweight europe, and why? we’re overweight europe and we’re really overweight europe because of the macro considerations happening therewith the greece situation, problems with portugal and theeuropean monetary system has caused a lot of people to flee.of course, a lot of that fled into emerging markets makes themexpensive. where does the money come out of? europe and japan, making them inexpensive. remember, a lot of theseeuropean companies, same holds true for japan, a vast minority of their revenues might come from their home market.what one has to consider is not the top-line macro economicgrowth where the company is based but consider where thecompany is making the money from. it’s where it’s making its money from. talk to me about financials. i know that’s a rathersignificant portion of the portfolio, but not just any financials.you’re not long the big, you know, sort of money center banks, the big investment banks. you’ve gone a different way there.why? we focus on banks that have a large asset management component it. like? take a credit suisse as an example. over half its operating profit comes from asset management. they earn good fees. there’s been a steady inflow. through the cycle, net new money has kept coming in. the beauty of asset management business, of course, is they grow for one of two reasons. usually it’s combined. over time assets go up. just because they get mark to market. and you derive more of thefee. and get more of the fee. net inflow. net new money. it’s not a bad business to be in. today they get lumped in with all these other financials and the price since the global financial crisis of many of these businesses, the prices have been hard hit — very wiquickly as we go to a wrap, what’s your largest singleholding? in credit suisse. interesting. thank you so much.continued good luck to you. thank you for having me. we really enjoy you when you.