As we look at the last quarter, two of our larger holdings, Credit Suisse and BNP (XPAR:BNP), fell under intense regulatory pressure from U.S.-based regulatory bodies. Both pleaded guilty to various charges and will pay large fines (see the Oakmark International letter for further discussion of Credit Suisse). Though this is unfortunate and points to lapses by some of their employees, we believe that the fundamental business value of each company, based on the present value of all future cash flow streams, does not align with the declines in these two companies’ share prices. Additionally, we believe that both companies are structurally intact, have strong business models, are well-capitalized and should be able to recover, post legal settlements.
From David Herro (Trades, Portfolio)'s Second Quarter 2014 Shareholder Letter.
