The top performing stock in the Fund this past quarter was Julius Baer Group (XSWX:BAER). Baer released interim results depicting assets under management of CHF289 billion, which outpaced market estimates, even though the company’s assets had declined almost 1% year-to-date due to the negative effects of a strong Swiss franc. Baer’s gross profit margin was better than we expected, and the company’s cost/income ratio was, in our view, solid and slightly lower than Baer’s target range. Additionally, the bank may be on the verge of reaching a settlement with U.S. authorities for charges of an alleged role in helping Americans with tax evasion—a topic that has plagued it and several other Swiss banks since the U.S. Department of Justice started the probe in 2011. The bank recently set aside USD350 million for fines related to such a U.S. tax settlement. This is less than consensus and much less than what we have expected. The settlement has been a long time in coming, and we are happy that the matter may soon be resolved. With the settlement nearing a close and with a strong balance sheet, we think Julius Baer Group remains poised to benefit significantly as interest rates and volatility levels normalize.
From David Herro (Trades, Portfolio)'s Oakmark International Small Cap Fund Second Quarter 2015 Commentary.
