| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.77% | -6.69% | -6.69% |
Harris Associates International Strategy returned -6.69% net in Q1 2026, underperforming the MSCI World ex USA Index return of -0.94%. The portfolio benefited from positions in Glencore, which rose on copper production strength and merger speculation, CNH Industrial on solid agricultural machinery results, and Samsung Electronics on memory super cycle dynamics driven by AI demand. Detractors included Dassault Systèmes on software sector concerns, LVMH despite solid luxury goods fundamentals, and adidas on disappointing outlook. The manager initiated six new positions including Compass Group, Coupang, Haleon, SAP, London Stock Exchange Group, and Unicharm, while eliminating eight positions. The strategy focuses on companies trading at meaningful discounts to intrinsic value, with particular emphasis on businesses with strong competitive positions and long-term growth prospects. The manager believes markets are increasingly driven by short-term noise rather than underlying business fundamentals, creating opportunities for patient, disciplined investors focused on long-term value creation.
Value-oriented international equity strategy focused on companies trading at meaningful discounts to intrinsic value, with emphasis on long-term fundamentals over short-term market noise.
Manager expects equity markets to remain driven by short-term noise and crowd behavior rather than underlying business value amid heightened volatility and geopolitical headlines. Portfolio positioned with patience and discipline, emphasizing companies trading at meaningful discounts to intrinsic value where long-term fundamentals drive expected returns.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Mar 31 2026 | 2026 Q1 | 005930 KS, 8113.T, ADS.DE, CNHI, CPG.L, CPNG, DSY.PA, GLEN.L, HLN.L, LSEG.L, MC.PA, SAP.DE | AI, Asia, Europe, international, Mining, semiconductors, software, value | - | International value strategy underperformed in Q1 2026 despite strong semiconductor and mining contributions. Manager actively repositioned portfolio with six new initiations, focusing on companies trading at significant discounts to intrinsic value. Believes current market volatility and short-term noise create opportunities for disciplined investors emphasizing long-term business fundamentals over headlines. |
| Jan 26 2026 | 2025 Q4 | 005930.KS, 6301.T, AZN, BABA, BAYRY, CNHI, DASTY, DSV.CO, EXO.MI, IMCD.AS, MBG.DE, NVS, SAND.ST, SDR.L, SKF-B.ST, SNY, SY1.DE, UL, WLN.PA | Chemicals, Europe, international, Logistics, Pharmaceuticals, semiconductors, value | - | Harris Associates International Strategy returned 4.93% net in Q4 2025, driven by pharmaceuticals, semiconductors, and logistics. The manager initiated five new positions including AstraZeneca and specialty chemicals companies, capitalizing on attractive valuations. They believe the decade-long U.S. growth stock outperformance paradigm unraveled in 2025, with European equities fundamentals improving and valuation spreads narrowing in their favor. |
| Oct 28 2025 | 2025 Q3 | 035420.KS, AMS.PA, BABA, BNZL.L, CNHI, DSV.CO, DSY.PA, EDEN.PA, FMX, GLEN.L, HEXA-B.ST, ITRK.L, KER.PA, LLOY.L, OTEX, SHL.DE, SIE.DE, SMIN.L, SN.L, UHR.SW | Europe, fundamentals, growth, international, Quality, technology, valuation, value |
BABA GLEN LN BABA GLEN LN |
International value strategy returned 4.09% net in Q3, driven by luxury goods, Chinese AI, and copper strength. Manager initiated nine new positions at attractive valuations while eliminating nine others. Key thesis centers on narrowing valuation spreads between U.S. growth and international value stocks, with European fundamentals improving and driving increased investor interest in undervalued quality companies. |
| Jul 22 2025 | 2025 Q2 | 035420.KS, AMS.PA, BABA, BNZL.L, CNHI, DSV.CO, DSY.PA, EDEN.PA, FMX, GLEN.L, HEXA-B.ST, ITRK.L, KER.PA, LLOY.L, OTEX, SHL.DE, SIE.DE, SMIN.L, SN.L, UHR.SW | AI, Copper, Europe, international, Luxury, Mining, technology, value |
105560 KS CON GR BAYN GR BABA MC FP ASML 6273 JP |
International value manager underperformed in Q3 but remains confident in thesis that U.S. growth dominance is ending. Portfolio benefited from luxury goods, Chinese AI, and copper exposure while agricultural equipment struggled. Initiated positions in undervalued European quality companies. Expects continued compression of valuation spreads to benefit international value approach. |
| Mar 31 2025 | 2025 Q1 | 2502.T, 8802.T, BABA, BNP.PA, FLTR.L, GLEN.L, KER.PA, MC.PA, RTO.L, TKA.DE, WPP.L | Asia, Cloud, defense, Europe, Gambling, international, Luxury, real estate, value |
BNP.PA BABA TKA.DE 2502.T FLTR.L RTO.L 8802.T MC.PA |
Harris Associates' International Strategy outperformed with 7.86% net returns, driven by BNP Paribas banking strength, Alibaba's AI-fueled cloud growth, and thyssenkrupp's defense exposure. New positions in LVMH luxury goods, Flutter gambling, and Japanese real estate reflect opportunistic value investing. The manager maintains conviction that persistent value-growth valuation imbalances will drive continued outperformance. |
| Apr 15 2024 | 2024 Q1 | BAYN.DE, BXB.AX, CON.DE, DTG.DE, ISP.MI, MBG.DE, PRU.L, SKG.L, SN.L | Autos, Europe, financials, healthcare, international, value | - | Harris Associates International Strategy underperformed in Q1 2024 with a 0.20% return versus 5.59% for the benchmark. Strong performance from Daimler Truck and Intesa Sanpaolo was offset by weakness in Bayer and Prudential. The team initiated three new value positions in Brambles, Smurfit Kappa, and Smith & Nephew, all purchased at discounts to intrinsic value. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIManager sees AI disruption risk as largely misapplied to certain software companies like Dassault, which simulates physical reality rather than managing information flows. Believes generic LLMs cannot easily bridge this distinction as it requires deep proprietary simulation datasets. Also notes AI-related employment disruption concerns affecting Compass Group valuation. |
Artificial Intelligence Software Disruption Enterprise |
Semiconductor CycleManager believes 2026 is likely to be the most profitable year yet for Samsung's memory business due to significant shortage of memory chips driven by insatiable demand from AI. Views this as thesis-affirmative and sees Samsung as one of the world's leading semiconductor companies with long runway for growth. |
Memory Semiconductors Samsung Supply | |
LuxuryLVMH delivered results broadly consistent with thesis, with healthy organic revenue growth and Fashion & Leather Goods segment slightly ahead of expectations. Manager believes negative share price reaction reflected overly optimistic investor expectations and sees the company as having a collection of iconic brands with long runway for future growth. |
LVMH Fashion Brands Growth | |
E-commerceInitiated position in Coupang, the leading e-commerce company in South Korea, comparing it to Amazon for wide product selection and best-in-class logistics. Manager believes Coupang's vertically integrated logistics model positions it well to capture market share and expand margins over the long term, despite recent cyber breach creating opportunity at attractive valuation. |
Coupang Logistics Korea Amazon | |
CopperGlencore benefited from supportive commodity price trends and strong Q4 production report for its copper business. Manager views Glencore shares as attractive on stand-alone basis thanks to significant and growing exposure to attractive copper assets, along with cash-generative coal business and differentiated marketing business. |
Glencore Mining Commodities Production | |
| 2025 Q4 |
AIManager believes AI revolution is fundamentally different from dot-com bubble due to current compute capacity constraints versus future demand. Views infrastructure buildout as most secure part of AI food chain, explaining continued investment in Nvidia, ASML, and new Micron position. Expects volatility but remains committed to AI thesis despite circular financing concerns around some players. |
Artificial Intelligence Data Centers Compute Infrastructure GPUs |
Trade PolicyManager notes 2025 saw global trade order rewritten through executive orders and tweets. Expects Supreme Court ruling on Trump tariff legality could invalidate IEEPA-imposed tariffs, though similar tariffs would likely be reimposed under other legal frameworks. Views tariffs as potential central topic for early 2026 but prefers they fade as investment concern. |
Tariffs Trade IEEPA Supreme Court | |
RatesFederal Reserve continued easing cycle with Fed Funds rate reaching parity with 2-year bond at 3.5%. Manager believes within 25-50 basis points of neutral rate. Disagrees with Trump's advocacy for several hundred basis point cuts, arguing it would steepen yield curve rather than reduce rates across all durations uniformly. |
Federal Reserve Interest Rates Monetary Policy | |
Enterprise SoftwareManager consolidated enterprise software exposure into platform companies ServiceNow and Salesforce while eliminating Adobe. Views platforms as better positioned than best-of-breed apps against AI disintermediation threats. Expects platform companies to deliver accelerating performance as AI solutions gain critical mass across enterprise. |
SaaS Platforms AI Integration | |
| 2025 Q3 |
ValueManager emphasizes investing in high-quality companies trading at attractive valuations below intrinsic value. Multiple positions initiated due to stocks trading at decade-low multiples despite solid fundamentals. |
Valuation Intrinsic Value Discount Quality Fundamentals |
AIAlibaba benefited from rapid Chinese AI growth with healthy Cloud segment revenue growth. The company is positioned as an early investor in Chinese AI with advanced capabilities and leading market position. |
Cloud Technology Growth China | |
CopperGlencore benefited from copper prices reaching near-record highs in September. Management expressed confidence that copper market conditions will grow more favorable with strong positioning to execute. |
Mining Commodities Metals Pricing | |
LuxuryKering rose in anticipation of new CEO leadership and Gucci collection debut. Manager believes new leadership can build on investments to strengthen luxury houses and return the group to growth. |
Consumer Brand Leadership Growth | |
| 2025 Q2 |
ValueManager emphasizes value investing approach and notes the unraveling of the U.S. growth/momentum paradigm that dominated for over a decade. European equities fundamentals have improved, driving more investor interest as valuation spreads compress. |
Value Valuation Europe Growth Momentum |
AIAlibaba Group benefited from rapid Chinese AI growth, with its Cloud segment posting healthy revenue growth. The company is well-positioned as one of the early investors in Chinese AI with advanced capabilities and leading market position. |
AI Cloud China Technology | |
CopperGlencore's stock price rose as copper prices reached near-record highs in September. Management expressed confidence that industry conditions in the copper market will grow more favorable, with Glencore well-positioned to execute. |
Copper Mining Commodities | |
LuxuryKering was a contributor during the quarter, rising in anticipation of new CEO Luca De Meo's tenure and Demna Gvasalia's debut collection at Gucci. New leadership is expected to build on investments to strengthen luxury houses and return the group to growth. |
Luxury Fashion Europe | |
| 2025 Q1 |
ValueThe manager argues that a large valuation imbalance remains present between value and growth equities, which will fuel better long-term performance for value stocks. They believe the weight of money has been heavily skewed to U.S. growth names for too long. |
Valuation Growth Outperformance Imbalance Long-term |
LuxuryThe portfolio includes positions in luxury goods companies LVMH and Kering. LVMH is viewed as a rare opportunity to purchase shares at a discounted valuation due to tariff fears and macro concerns, while Kering's management is trusted to identify creative personnel to extract value. |
Fashion Brands Premium Tariffs Recovery | |
CloudAlibaba's cloud revenue grew due to strong demand for cloud services and AI demand. The company has aggressively invested in AI and is one of the early leaders in China, being unique as a leader in both cloud computing services and large language models. |
AI Computing Services China Growth | |
Defense SpendingFollowing Germany's February general election, the newly elected government voted to increase spending with particular focus on defense. This benefits thyssenkrupp's Marine Systems segment, which should see significantly increased demand and orders going forward. |
Government Military Marine Orders Germany | |
GamblingFlutter Entertainment is the world's largest online gambling company with premier brands including FanDuel and Pokerstars. Online gambling favors scaled players and the company is well-positioned to capitalize on strong secular growth tailwinds as penetration continues to increase. |
Online Sports Betting Penetration Scale Secular | |
| 2024 Q1 |
ValueThe fund invests in businesses priced at substantial discounts to intrinsic value estimates. Multiple new positions were initiated at discounts to intrinsic value including Brambles, Smurfit Kappa, and Smith & Nephew. The strategy focuses on finding value regardless of what is in favor at any given moment. |
Intrinsic Value Discount Undervalued Fundamental Analysis Bottom-up |
AutosSignificant exposure to automotive companies including Daimler Truck Holding, Mercedes-Benz Group, and Continental. Daimler Truck showed margin resilience despite weaker global truck markets. Mercedes-Benz discussed electric vehicle market development and positioning. Continental continues on an accelerating pace of positive progress. |
Electric Vehicles Truck Manufacturing Automotive Parts EV Market Commercial Vehicles |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 28, 2025 | Fund Letters | David Herro | BABA | Alibaba Group Holding Ltd. | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | NYSE | AI, buybacks, China, cloud, e-commerce, growth, technology, valuation | Login |
| Oct 28, 2025 | Fund Letters | David Herro | GLEN LN | Glencore plc | Materials | Diversified Metals & Mining | Bull | NYSE | cash flow, Commodities, Copper, dividend, Electrification, Mining, valuation | Login |
| Oct 28, 2025 | Fund Letters | David Herro | BABA | Alibaba Group Holding Ltd. | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | NYSE | AI, buybacks, China, cloud, e-commerce, growth, technology, valuation | Login |
| Oct 28, 2025 | Fund Letters | David Herro | GLEN LN | Glencore plc | Materials | Diversified Metals & Mining | Bull | NYSE | cash flow, Commodities, Copper, dividend, Electrification, Mining, valuation | Login |
| Jul 22, 2025 | Fund Letters | David Herro | MC FP | LVMH Moët Hennessy Louis Vuitton SE | Consumer Discretionary | Apparel, Accessories & Luxury Goods | Bull | Euronext Stock Exchange | brands, cashflow, China, dividends, Luxury, Pricingpower | Login |
| Jul 22, 2025 | Fund Letters | David Herro | ASML | ASML Holding N.V. | Information Technology | Semiconductor Equipment | Bull | Euronext Stock Exchange | CapEx, Euv, growth, Lithography, Monopoly, semiconductors | Login |
| Jul 22, 2025 | Fund Letters | David Herro | 6273 JP | SMC Corp. | Industrials | Industrial Machinery | Bull | New York Stock Exchange | Automation, CapEx, Cyclicality, Freecashflow, Industrials, Pneumatics | Login |
| Jul 22, 2025 | Fund Letters | David Herro | 105560 KS | KB Financial Group Inc. | Financials | Banks | Bull | New York Stock Exchange | banking, buybacks, dividends, Governance, Korea, valuation | Login |
| Jul 22, 2025 | Fund Letters | David Herro | CON GR | Continental AG | Consumer Discretionary | Auto Parts & Equipment | Bull | Xetra | Autosuppliers, Electrification, Margins, restructuring, Tires | Login |
| Jul 22, 2025 | Fund Letters | David Herro | BAYN GR | Bayer AG | Health Care | Pharmaceuticals | Bull | Xetra | conglomerate, Cropscience, litigation, pharma, restructuring, valuation | Login |
| Jul 22, 2025 | Fund Letters | David Herro | BABA | Alibaba Group Holding Ltd. | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | New York Stock Exchange | buybacks, China, cloud, ecommerce, Regulation, valuation | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | 8802.T | Mitsubishi Estate | Real Estate | Real Estate Management & Development | Bull | Tokyo Stock Exchange | asset monetization, capital returns, inflation, Japan, Marunouchi, NAV discount, Prime Office, Real Estate, Tokyo | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | FLTR.L | Flutter Entertainment | Consumer Discretionary | Hotels, Restaurants & Leisure | Bull | London Stock Exchange | FanDuel, Gaming, market leader, online gambling, PokerStars, Scale Advantages, secular growth, Sports betting | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | 2502.T | Asahi Group Holdings | Consumer Staples | Brewers | Bull | Tokyo Stock Exchange | Australia, Beer, Brewers, Central Europe, consumer staples, deleveraging, Japan, shareholder returns, Tax Reform | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | RTO.L | Rentokil Initial PLC | Industrials | Commercial Services & Supplies | Bull | London Stock Exchange | Acquisitions, cash flow generation, Defensive growth, market leader, pest control, Scale Advantages, Terminix integration | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | TKA.DE | thyssenkrupp | Industrials | Industrial Conglomerates | Bull | XETRA | Defense, Germany, Government Spending, industrial conglomerate, Marine Systems, spin-off, value unlock | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | MC.PA | Louis Vuitton Moët Hennessy | Consumer Discretionary | Textiles, Apparel & Luxury Goods | Bull | Euronext Paris | Bernard Arnault, brand portfolio, China, fashion, Leather Goods, Luxury goods, LVMH, premium brands, tariffs | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | BABA | Alibaba Group | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | NYSE | AI, China, Cloud computing, Consumer Discretionary, e-commerce, large language models, monetization, technology | Login |
| Mar 31, 2025 | Fund Letters | Harris Associates International Equity Strategy | BNP.PA | BNP Paribas | Financials | Banks | Bull | Euronext Paris | Banks, Corporate Banking, Diversified, Europe, financials, france, Institutional Banking, Personal Finance | Login |
| TICKER | COMMENTARY |
|---|---|
| GLEN.L | Glencore was a contributor during the quarter. The Switzerland-headquartered minerals and mining company's stock price rose early in the quarter amidst preliminary discussions for a possible merger with Rio Tinto, a strong Q4 production report for its copper business, and supportive commodity price trends. Reported earnings were broadly in line with market expectations, but the company positively surprised the market with a higher than expected dividend. Although the potential merger is no longer proceeding, we view Glencore shares as attractive on a stand-alone basis thanks to significant (and growing) exposure to attractive copper assets, its cash-generative coal business, differentiated marketing business, and shareholder-friendly management team. |
| CNHI | CNH Industrial was a contributor during the quarter. The European headquartered agricultural and farm machinery company saw its stock rise as it reported results that were modestly ahead of expectations, supported by solid revenues across both divisions and stable Agricultural segment margins. The company also reaffirmed its 2026 guidance. However, management noted that demand conditions could remain challenged in 2026, while setting expectations for healthier growth in 2027 and beyond. We continue to believe CNH has the right leadership team to navigate ongoing destocking pressures and unlock value as industry conditions improve. |
| 005930.KS | Samsung Electronics was a contributor during the quarter. The South Korea-headquartered technology company's stock price rose as it reported strong fourth-quarter 2025 results that benefited from the ongoing Memory super cycle. We believe 2026 is likely to be the most profitable year yet for Samsung's memory business as there is a significant shortage of memory chips driven by what seems like an insatiable demand due to AI. We are encouraged by these thesis-affirmative results and continue to believe Samsung is one of the world's leading semiconductor companies with a long runway for future growth. |
| DSY.PA | Dassault Systèmes, the French-headquartered software company, was a detractor during the quarter. The stock de-rated after reporting soft Q4 2025 results alongside cautious 2026 guidance, driven in part by cyclically weak demand across its Life Sciences and Industrial/Automotive segments—headwinds we believe are largely transitory. The selloff was compounded by the broader SaaSpocalypse narrative weighing on enterprise software multiples. While we take the AI disruption risk seriously, we believe it is largely misapplied here: Dassault's software simulates physical reality rather than purely managing information flows, a distinction generic LLMs cannot easily bridge, as doing so requires deep, proprietary simulation datasets only established CAD providers possess. Dassault is also rolling out multimodal AI capabilities, leveraging its physics-based layer to power agentic and generative experiences across their 3DEXPERIENCE cloud platform. With multiples near decade lows and conservative guidance now embedded in expectations, we believe the risk/reward is compelling. |
| MC.PA | LVMH was a detractor during the quarter. The France headquartered luxury goods company's stock declined despite delivering results that were broadly consistent with our thesis. Organic revenue growth remained healthy, and the all-important Fashion & Leather Goods segment came in slightly ahead of our expectations. In our view, the negative share price reaction reflected overly optimistic investor expectations and Bernard Arnault striking a more measured tone than usual at the start of the year. We continue to believe the company encompasses a collection of iconic brands with a long runway for future growth. |
| ADS.DE | adidas was a detractor during the quarter. The Germany-headquartered sportswear brand saw its stock price decline as it reported healthy results with strong direct-to-consumer metrics and performance in the Chinese market but an outlook that disappointed the market. Still, we think the release was filled with positives as CEO Bjørn Gulden's contract was extended to 2030, the company appointed a new chairman that is focused on shareholder-friendly capital allocation, and it also committed to repurchase EUR 1 billion of shares in 2027 and 2028. We met with management and appreciate their focus on being product-first and continuing to improve performance in key markets. |
| CPG.L | Compass Group is the world's leading contract foodservice provider. We know the company well, having invested in it successfully in the past, and value its demonstrated ability to generate resilient, recurring revenues through long-term outsourcing partnerships across core end markets, including business, healthcare, education and leisure. In our view, its scale, operational excellence, and decentralized operating model position it well to capitalize on the ever-growing addressable market and see consistent growth and margin progression over time. Despite strong fundamentals, the stock has underperformed the broad market since we sold out of it, as it has experienced multiple compression due to investor concerns over the end of the post-COVID recovery and AI-related employment disruption. This created the opportunity to invest alongside a strong management team in a company that we believe is poised to expand its business and generate solid shareholder returns. |
| CPNG | Coupang is the leading e-commerce company in South Korea, often compared to Amazon for its wide product selection, strong customer service, and best in class logistics network. Founded in 2010, the company has built its reputation around its Rocket WOW system, which offers same-day or next-day shipping on millions of items. What differentiates this service is Coupang's deeply vertically integrated logistics model. Rather than relying primarily on third-party sellers and carriers, the company owns and operates its fulfillment centers, manages inventory directly, and controls last-mile delivery through its own network. We believe this advantage positions it well to capture market share and expand margins over the long term. Despite Coupang's e-commerce dominance, its share price has fallen significantly since last November after a cyber breach. We continue to monitor the fallout from the cyber incident but believe this has given us an opportunity to invest in a high-quality company at an attractive valuation. |
| HLN.L | Haleon is one of the world's largest consumer healthcare companies, with a strong portfolio of leading brands including Sensodyne, Advil, Voltaren, and Panadol. We are attracted to its exposure to high-quality categories with meaningful barriers to entry and view the business as well-positioned for sustained growth as a standalone entity. As a carve-out assembled from the consumer health divisions of multiple large pharmaceutical companies, the business was historically under-managed, with limited strategic focus and suboptimal cost discipline. Now operating independently, management is prioritizing efficiency, streamlining the organization, and investing in modern consumer capabilities, which should support steady expansion of operating margins over time. Despite its strong outlook, we believe the stock is undervalued due to technical pressure and misperceptions about its fundamentals. This created the opportunity to invest in a company with a product portfolio that has a long runway for future growth, helping it unlock significant value over time. |
| SAP.DE | SAP is one of the largest enterprise software providers in the world and a global leader in enterprise resource planning. The Germany-based company provides solutions that form the backbone of its clients' technology infrastructure, leading to recurring revenue streams and very low churn rates. Recently, SAP has accelerated the rate of client migrations from on-premise to cloud systems, a trend we expect to improve growth and reduce costs. However, those benefits have not resonated in a market concerned that artificial intelligence will obscure the need for enterprise software. We believe that narrative underestimates the scale, data ownership, and definition of client workflows that make SAP an irreplaceable piece of its clients' tech ecosystems. Moreover, we have confidence that this management team—led by a tested CEO and prudent, disciplined CFO—can steer SAP through the artificial intelligence era. We have invested successfully in SAP before and were excited to buy back in at what we view as a considerable discount to our estimate of intrinsic value. |
| LSEG.L | The London Stock Exchange Group (LSEG) is a vertically integrated, multi-asset trading infrastructure and data company. The group's assets include an attractive set of what we see as monopolistic/oligopolistic market positions held through leading market infrastructure franchises including the London Stock Exchange (trading), LCH (clearing), TradeWeb (debt trading platform), FTSE Russell (indexes), and a market leading data, analytics, and workstation platform. These assets are highly defensive and generate predominantly contracted and recurring revenues that have historically grown organically mid-single-digits and above. For the past several years, LSEG has been spending heavily to integrate and upgrade assets acquired through its 2019 purchase of Refinitiv. The company is at the tail end of the investment period and should be able to realize material margin improvement with declining capex spending, driving strong free cash flow growth. Despite its high-graded assets and attractive financial outlook, the shares have de-rated to decade-low multiples and trade at a meaningful discount to peers, owing to AI competition concerns. We believe AI competitive risks affect only a minority of company profitability and that the valuation presents us an opportunity to initiate a position in a great company trading at a meaningful discount to our estimate of its intrinsic value. |
| 8113.T | Unicharm is a leading global personal care company, best known for products across feminine hygiene, adult incontinence, and baby diapers. The stock has been punished due to intensified competition in China and Southeast Asia, but we believe these markets are not structurally broken, while their importance to group profit has also diminished, with the two regions combined accounting for an estimated ~20% of operating profit in 2025 vs. double that at the peak. Meanwhile, Unicharm holds strong positions in pet care in the US and in both personal and pet care in Japan, which we believe will allow the company to healthily grow profits despite the challenging environment in Asia ex-Japan. With the company trading at the lowest multiples in more than a decade and a half, we believe the market is underpricing the remaining growth opportunity and the resilience of the business. |
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