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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Oakmark International Fund 2023 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Oakmark International Fund)

Primary Source Intelligence • Q1 2023 Letter Analysis

Oakmark International Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Oakmark International Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+13.9%

Annualized+8.69%

Positioning StanceConstructive

GeographyEurope

Digest Analysis

Quick Take

"Views recent banking stress as bank-specific rather than systemic, creating opportunities in quality European institutions trading at attractive valuations with strong capital positions. Exited Credit Suisse after thesis proved wrong."

Executive Summary

David Herro's Oakmark International Fund delivered strong Q1 2023 returns of 13.9%, driven primarily by a rebound in European holdings, especially German-based companies. The manager views the banking sector stress from Silicon Valley Bank and Signature Bank collapses as bank-specific crises rather than systemic issues, creating opportunities in quality European banks. Unlike their US counterparts, European bank holdings have smaller securities portfolios as a percentage of assets, reducing potential for unrealized losses. Holdings like Intesa Sanpaolo, Lloyds Banking Group, and BNP Paribas trade at attractive valuations with high dividend yields and excess capital for buybacks. The fund exited its long-held Credit Suisse position after determining the investment thesis was no longer viable following repeated risk management failures. Herro emphasizes using volatility to identify discrepancies between share prices and intrinsic value, positioning portfolios to maximize long-term returns through disciplined value investing during periods of market stress.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

High conviction evidenced by concentrated European bank holdings with specific position sizing (BNP Paribas 3.0%, Intesa Sanpaolo 2.9%, Lloyds 2.8%). Manager provides detailed fundamental analysis and explicitly used volatility to add to positions. Clear thesis on banking sector opportunities with specific valuation metrics cited.

Growth Outlook

40%

BearishBullish

Neutral (40%)

Manager is constructive on European markets noting they still trade at discounts to rest of world, and sees banking sector opportunities despite recent stress. However, acknowledges crisis conditions and volatility, preventing a more bullish score.

Risk Appetite

55%

DefensiveAggressive

Balanced (55%)

Portfolio is positioned to take advantage of volatility with concentrated European bank holdings. Manager explicitly used March banking stress as opportunity to add to positions, demonstrating moderate risk appetite despite acknowledging crisis conditions.

Capital Deployment

35%

De-riskingDeploying

Net Neutral (35%)

Manager explicitly states using March volatility as opportunity to add to positions when share prices decreased without corresponding decline in intrinsic value. However, no specific cash level changes mentioned, suggesting moderate selective deployment rather than aggressive capital deployment.

Forward Guidance

45%

CautiousExpansionary

Neutral (45%)

Manager expects banks to benefit from triple positive of higher rates, resilient economies, and capital return opportunities. However, guidance is measured and acknowledges ongoing volatility, suggesting selective rather than aggressive deployment.

Language Signal

35%

BearishBullish

Bearish (35%)

Language balances opportunity terms like 'attractive,' 'value accretive,' and 'benefit' with risk acknowledgment including 'crisis,' 'stress,' and 'volatility.' Slightly more opportunity-focused but tempered by crisis context.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

Manager acknowledges banking sector crisis conditions, individual bank failures, and broader market volatility. Discusses specific risks including duration mismatches and deposit concentration. However, frames these as creating opportunities rather than systemic threats.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

Manager sees abundant opportunities in European banks trading at discounts, with specific examples of attractive valuations and capital return potential. Views volatility as creating wider discrepancies between price and intrinsic value, expanding opportunity set.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Manager emphasizes long-term return potential and disciplined value investing approach. References being Credit Suisse shareholder for more than two decades, indicating patient capital approach. Focus on intrinsic value convergence suggests multi-year investment horizon.