The largest detractor from the Fund’s performance for the past quarter – and one of the largest detractors in the calendar year – was a holding just added in June: CGG (CGG), an operator and provider of seismic acquisition and data processing. As a seismic company, CGG relies directly on oil and gas companies' investments. During the second half of 2013, in an environment with flat oil prices and continuing inflation across the supply chain, several oil and gas companies decided to further postpone their investments and wait until the economy improves to sanction new projects. Positioned at the beginning of the supply chain, CGG has been hurt by the cancellation of several projects, as well as lower-than-expected price increases. As a result, management smartly decided to launch a three-year plan to downsize CGG's fleet in order to lower fixed costs and to focus on the most profitable segments. Despite these conditions, we think our investment case remains valid. With the end of "easy oil," we believe that this offshore seismic company still offers an attractive investment opportunity.
From David Herro (Trades, Portfolio)'s Oakmark International Small Cap Fund fourth quarter 2013 commentary.
