Prosus (XAMS:PRX, Financial) (Netherlands), owing to its 29% stake in Tencent and the impact of the Russian invasion of Ukraine, was a notable detractor for the first quarter. Tencent was negatively impacted by fears for increased regulation and a poor macro backdrop that has negatively impacted fundamentals. We have spoken with numerous contacts on the changing regulatory landscape in China. Although we believe structural growth at Tencent will be lower in the future due to the new regulatory environment, it remains an excellent business with a high degree of innovation. Later during the quarter, Russia’s invasion of Ukraine weighed on companies with exposure to Russia. In Prosus’ case, its two Russian assets, Avito (the largest online classifieds company in Russia) and Mail.ru (the largest social media company in Russia), are now valueless in our estimation and resulted in a small reduction of our estimate of Prosus’ intrinsic value. While we monitor any new developments closely, we continue to believe Prosus remains extremely undervalued relative to its sum of the parts.
From David Herro (Trades, Portfolio)'s Oakmark Global Fund first-quarter 2022 commentary.
