David Herro

David Herro

Last Update: 2014-11-21
Related: Oakmark Intl Small Cap

Number of Stocks: 60
Number of New Stocks: 4

Total Value: $28,919 Mil
Q/Q Turnover: 10%

Countries: USA JPN ITA CHE GBR DEU FRA NLD AUS KOR SWE HKG CAN
Details: Top Buys | Top Sales | Top Holdings  Embed:

David Herro' s Profile & Performance

Profile

David Herro has been a manager of the Oakmark International Fund (OAKIX) since 1992, the Oakmark International Small Cap Fund (OAKEX) since 1995 and the Oakmark Global Select Fund (OAKWX) since 2006. He is also the Chief Investment Officer for International Equities at Harris Associates, which he joined in 1992.

His career honors include being named Morningstar's International Stock Fund Manager of the Year in 2006 and International Stock Fund Manager of the Decade for 2000-09.

Mr. Herro has an M.A. in Economics from the University of Wisconsin-Milwaukee (1985) and a B.S. in Business/Economics from the University of Wisconsin-Platteville (1983).

Web Page:https://www.oakmark.com/oakmark/web/me.get?WEB.websections.show&OAKMARK_948

Investing Philosophy

1. Buy businesses that are trading at a significant discount to his estimate of the company's intrinsic value.

2. Invest with companies expected to grow shareholder value over time. Value investors can sometimes fall into the trap of buying a stock that is inexpensive for a reason—because the company just does not grow. He looks for good quality, growing businesses with positive free cash flow and intelligent investment of cash.

3. Invest with management teams that think and act as owners. He seeks out companies with management teams that understand the dynamics of per share value growth and are focused on achieving such growth. Stock ownership and incentives that align managements' interests with those of shareholders are key components of this analysis

Historical Allocation of Stock, Bonds, Cash

Total Holding History

Performance of Oakmark International Fund

YearReturn (%)S&P500 (%)Excess Gain (%)
201329.3431.55-2.2
201229.2215.413.8
2011-14.072.08-16.1
3-Year Cumulative43.6 (12.8%/year)55 (15.7%/year)-11.4 (-2.9%/year)
201016.2215.061.2
200956.326.4629.8
5-Year Cumulative160.9 (21.1%/year)125.5 (17.7%/year)35.4 (3.4%/year)
2008-46.06-37-9.1
2007-0.515.61-6.1
200630.615.7914.8
200514.124.919.2
200419.09127.1
10-Year Cumulative148.5 (9.5%/year)104.1 (7.4%/year)44.4 (2.1%/year)
200338.0428.79.3
2002-8.46-22.113.6
2001-5.13-11.96.8
200012.5-9.121.6
199939.472118.5
15-Year Cumulative367.4 (10.8%/year)98.3 (4.7%/year)269.1 (6.1%/year)
1998-7.0128.6-35.6
19973.3333.4-30.1
199628.02235.0
19958.3237.6-29.3
1994-9.061.3-10.4
20-Year Cumulative466.4 (9.1%/year)483.2 (9.2%/year)-16.8 (-0.1%/year)
199353.5810.143.5
19920.437.6-7.2

Top Ranked Articles

David Herro On Banco Santander
David Herro of Oakmark commented on the European situation earlier this month. In particular, he has the following assessment for Spain’s Banco Santander (STD):Using this approach allows us to add good quality businesses at attractive price points to our portfolios. An example of this tactic is our investment in the Spanish bank, Banco Santander. This bank has been on our radar for a long time and, in our view, Banco Santander ranks among the highest quality global financial firms that exist today. Some attributes that have led to this assessment are: Read more...
David Herro: Hard to Believe Japan Selloff Is Real Value Lost
David Herro manages Oakmark International and he was named Morningstar’s Fund Manager of the Decade last year. Apparently his fund owns some Japanese names, and the recent market action there does not bore well for his fund. Read more...
David Herro on Where to Invest Now
David Herro, portfolio manager of the Oakmark International Fund, tells CNBC where he's putting his money to work now. Read more...
Oakmark Buys More Shares of Its Worst Performing Stocks
Oakmark, a long-term focused value investment firm, increased its holdings in what it called its “top detractors” -- stocks whose prices dropped -- of its international fund in the second quarter. Oakmark International underperformed the S&P benchmark with a -1% return this year through mid-September. Managers, however, viewed the short-term dip as an opportunity to buy more stocks it considers good values at even better prices. Read more...
The 3 New Buys of New Guru David Herro, International Fund Manager
A new member of GuruFocus’ list of Gurus, David Herro leads the Oakmark International Fund (OAKIX), which just celebrated its 20th anniversary, at the same firm with fellow Guru Bill Nygren, The Oakmark Funds. Herro has an M.A. in economics from the University of Wisconsin-Milwaukee and was named Morningstar’s International Stock Fund Manager of the decade from 2000 to 2009. Read more...
» More David Herro Articles

Commentaries and Stories

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David Herro Comments on Applus Services SA
We added one new security to the Fund during the quarter, Spain-based Applus Services (XMCE:APPS). Applus is a leading global certification company specializing in testing, inspection and certification services. The company provides solutions for clients in all sectors to ensure that their assets and products comply with environmental, quality, health and safety standards and regulations. More...

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David Herro Comments on Fugro
Netherlands-domiciled geological engineering company Fugro (XAMS:FUR) was the largest detractor from performance for the calendar year due to continued declines in oil prices, which led to further postponements/cancellations of off-shore projects. During the fourth quarter Fugro announced another significant downgrade to its earnings outlook as well as a host of restructuring/impairment charges, which put into question its ability to comply with financial covenants. As the quarter progressed, Fugro’s balance sheet improved as Royal Boskalis Westminster acquired nearly a 15% stake in the company and Fugro secured amendments to its financial covenants. However, falling oil prices could make the operating environment in 2015 even more challenging than it was in 2014. More...

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David Herro Comments on DGB Financial Group
The Fund’s largest detractor for the quarter was DGB Financial Group (XKRX:139130), a regional South Korean financial holding company that provides a full range of consumer and commercial banking-related financial services. Late in October, DGB released its third quarter results, which were only slightly below our estimates but were weaker than its peers in South Korea. In mid-November, DGB announced a rights issuance, which ignited a significantly negative market response. DGB plans to use the additional capital to accommodate growing its loan business, to initiate an auto finance business and to acquire Woori Aviva Life Insurance Company. We also have concerns about the issuance, as the use of capital appears to be suboptimal and is counter to DGB’s previously stated intentions of slowing growth in order to focus on harvesting better margins. However, we continue to believe DGB’s primary business region and its current undervaluation support the stock’s attractiveness. More...

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David Herro Comments on gategroup Holding AG
The top performing stock in the Fund this past quarter was gategroup (XSWX:GATE) (“Gate”), a Swiss company that provides services to the travel industry, including flight catering, airport services and lounge operation. During the quarter Gate reported its third quarter results, which showed that its multiyear restructuring program was beginning to have a positive impact on group margins. Furthermore, 2014 proved to be one of the better operating environments for the airline industry (Gate’s key customers) since the financial crisis due to robust passenger growth and recent declines in oil prices, which have helped airline profitability. The more favorable macro backdrop should benefit Gate into 2015, but the key driver to value creation will be the continued execution of its cost-reduction plans. In November, Gate’s board appointed Christoph Schmitz as its new Chief Financial Officer, which we hope leads to better execution of the cost-reduction plan and increased focus on improving the cash conversion of the business. More...

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David Herro Comments on Tesco PLC
In previous commentaries we discussed the succession of issues faced by Tesco (LSE:TSCO), a U.K. based grocery retailer, and our reassessment of fair value estimates. Typically, when we make an error in judgment on a stock, we have confidence it will overcome any short-term headwinds and recover. However, we recognized this investment was a mistake and thus sold our shares. Tesco was the largest detractor for the calendar year and was a major cause of our underperformance for the year. Although we strive to keep investment errors to a minimum, we do learn from our mistakes. More...

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David Herro Comments on Honda Motor Co Ltd
Honda Motors (TSE: 7267), another leading global vehicle manufacturer, was the quarter’s biggest detractor, falling 15%. Honda’s second-quarter operating profit was below investors’ expectations, partially due to costs associated with a vehicle recall in Japan. The company reduced its full-year auto sales volume guidance and lowered its net profit forecast, but left its total operating profit expectations unchanged. Despite lower earnings, management reduced its current capital spending budget and expects free cash flow to improve for the remainder of the year. During the quarter, the National Highway Traffic Safety Administration opened a probe into whether Honda failed to report incidents involving air bag malfunctions that resulted in injuries or deaths. Subsequently, Honda launched its own independent audit of “potential inaccuracies” related to under-reporting. Because an outside company manufactured the airbags, we believe that company may be held partially responsible for any liability claims made against Honda. Based on similar circumstances involving vehicle manufacturer recalls, our assessment is that Honda’s More...

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David Herro Comments on Daimler AG
Daimler AG (XTER:DAI), a leading global vehicle manufacturer, was the quarter’s top contributor, returning 9%. Daimler’s third-quarter results released late in October showed overall revenue growth of 10% from the year-ago period. Additionally, free cash flow reached approximately EUR 3.4 billion, which was nearly twice the EUR 1.8 billion from one year ago. For the full fiscal nine months, revenues in its core Mercedes-Benz division were stronger than our forecast, driven by unit sales increases mainly in China and the U.S. Despite continued weakness in Germany, Western Europe improved in the third quarter. We recently met with CFO Bodo Uebber to discuss details of Daimler’s previously announced long-term strategy, which includes increasing the number of Mercedes-Benz dealerships and unit sales in China and capitalizing on recent dealership improvements (better sales training, new technology systems) to steadily boost division profits, as well as initiatives to strengthen business in other divisions. We think that Daimler’s management team is taking the right steps that will result in continued benefits to shareholders. From More...

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David Herro's Oakmark International Fund 4Q 2014 Letter
The Oakmark International Fund declined 0.5% for the quarter ended December 31, 2014, outperforming the MSCI World ex U.S. Index, which declined 4% over the same period. The Fund’s calendar-year performance was weak in absolute and relative terms, declining 5% versus the MSCI World ex U.S. Index’s loss of 4%. Most importantly, the Fund has returned an average of 10% per year since its inception in September 1992, outperforming the MSCI World ex U.S. Index, which has averaged 6% per year over the same period. More...

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David Herro's 4Q 2014 Market Commentary David Herro - David Herro's 4Q 2014 Market Commentary
Fellow Shareholders, More...

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Oakmark's David Herro Buys 5 New Small Caps David Herro,Oakmark International Small Cap Fund - Oakmark's David Herro Buys 5 New Small Caps
David Herro (Trades, Portfolio) runs several funds at Oakmark, including the Oakmark International Small Cap Fund. Through the first nine months of 2014, this fund declined 2%, just beating its benchmark MSCI World ex U.S. Small Cap Index, which declined 3%. Since inception in 1995, it has given investors 10% returns on average per year. More...

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David Herro's 4 International Stock Picks of Q3 David Herro - David Herro's 4 International Stock Picks Of Q3
David Herro (Trades, Portfolio) (Trades, Portfolio) leads Oakmark’s International Fund, which declined 1 percent in the year’s first three quarters, underperforming the MSCI World ex U. S Index’s 5 percent gain. Since inception though the fund has averaged an 11 percent return compared to 6 percent for the index. More...

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David Herro: Risk/Reward More Attractive in Europe David Herro - David Herro: Risk/Reward More Attractive In Europe
As eurozone recession fears mount, Europe-based firms with a global footprint are becoming attractively valued; meanwhile bargains are harder to find in Japan and the emerging markets, says the Oakmark International manager. More...

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David Herro Comments on Fugro
Fugro (XAMS:FUO) was the largest detractor from performance for the fiscal year and recent quarter end. This Netherlands-domiciled geological engineering company released a profit warning in July, indicating that first-half margins would be in the low single-digits (lower than both market and our expectations) and that it would be booking EUR 300-350 million of impairments in its subsea joint venture and multi-client library. These disappointments caused the share price to decline over 40% during July. The very weak first-half results were a culmination of both a soft end market (a majority of Fugro’s profits are derived from the offshore oil and gas market) and a number of company-specific operational issues. The slowdown in offshore exploration and production (E&P) spending looks like it will likely continue into 2015 and possibly beyond. We have adjusted our forecasts and estimates of intrinsic value to reflect this lower growth environment. However, longer term, we believe that off-shore capital expenditure trends will eventually improve as oil demand continues to increase moderately, while production from More...

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David Herro Comments on Altran Technologies
Altran Technologies (XPAR:ALT), an engineering and technology consulting company that offers services throughout Europe, was the largest contributor to performance for the fiscal year ended September 30. Altran’s restructuring efforts demonstrate how our emphasis on quality management teams can pay off. First, the management team reduced overhead costs, and second, Altran has more recently shown material improvements in the utilization of its engineers, causing invoicing rates to rise quarter over quarter. Higher invoicing rates are necessary for Altran to narrow the margin gap compared with its best-in-class peers. We are optimistic that these positive trends will continue into the second half of 2014 and that Altran will report another year of margin improvement. More...

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David Herro Comments on BS Financial
The Fund’s regional South Korean banks, DGB Financial Group and BS Financial, were two of the top-performing stocks for the recent quarter. BS Financial (XKRX:138930)’s proposed acquisition of another small regional bank, Kyongnam Bank, would be a strategic use of capital that could further enhance the company’s competitive position, should the deal close. We also think BS’s strong deposit franchise gives it a significant funding advantage over its peers and should generate substantial profitability once interest rates normalize. We continue to believe the valuation of this high quality regional bank with dominant market share remains attractive, offering a compelling reason to own. More...

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David Herro Comments on DGB Financial Group
The Fund’s regional South Korean banks, DGB Financial Group and BS Financial, were two of the top-performing stocks for the recent quarter. We believe that strong economic growth in DGB (XKRX:139130)’s primary business region and a current undervaluation of the stock adds to DGB’s attractiveness. (DGB, like BS, should also benefit from interest rate normalization.) More...

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David Herro Comments on CNH Industrial
The largest detractor from performance for the quarter and the past twelve months was CNH Industrial (MIL:CNHI), a manufacturer of agricultural and construction equipment. As expected, the company’s agricultural equipment business is experiencing reduced sales due to lower crop prices and farm profitability. However, we believe the agricultural segment to be a structurally appealing industry. Higher adoption of double cropping, increases in farm sizes in emerging and frontier markets, and the global need to increase yield will increase the demand for larger equipment. We believe CNH will continue to benefit from these trends as the second largest leader in this industry. In addition, the company’s commercial vehicles (Iveco) and construction equipment businesses have performed more poorly than expected. Weakness in Europe and Latin America, combined with adverse currency movements, have negatively impacted these businesses and led to very low levels of profitability. As these conditions return back to a more normal level, we believe these two segments will significantly improve. We believe management is taking More...

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David Herro Comments on Olympus
Another top contributor was Olympus (TSE:7733), the world leader in endoscopes and other medical equipment, which returned 18% over the past twelve months. Management continues to invest in the medical business with a focus on growth in surgery. Olympus is the dominant player in the gastrointestinal space, but the company is a relative newcomer to surgery. Olympus plans to enlarge its sales staff and enhance its research and development capabilities in the surgical business. Management believes the medical segment will grow 10% this year, driven by higher sales in surgery in addition to endoscope growth in the emerging world. Although the camera business remains weak in our view, Olympus also plans to invest in this division, and management’s goal is to boost revenues enough to cover costs this year. More...

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David Herro Comments on Intesa Sanpaolo
Intesa Sanpaolo (MIL:ISP), an Italian retail and commercial bank, was the top contributor to performance over the past 12 months, returning 50%. Intesa’s share price has rebounded as fears over Italy’s banking system and government have subsided. We have always believed these fears were overblown and that Italy was in much better long-term fiscal health than many of its periphery countries. The new CEO has committed to return EUR 10 billion to shareholders via dividends over the next four years. This constitutes a cumulative payout ratio in excess of 70%. Even with this return of capital to shareholders, Intesa should be over-capitalized compared with Basel III requirements, leaving the door open for additional capital returns. Additionally, management plans to increase investments in fee-based businesses, including asset management and insurance, and to exit non-core businesses and investments. We believe management has a solid plan for the future and believe the investment will continue to provide value for our shareholders. More...

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Oakmark's David Herro New Interview David Herro - Oakmark's David Herro New Interview
David Herro is a renowned value investor who is the chief investment officer of international equity at Harris Associates. He co-manages the Oakmarks International Fund (OAKIX) (which is closed to new investors), the Oakmarks International Small Cap Fund (OAKEX) and the Oakmarks Global Select Fund (OAKWY). All of the Oakmark funds have outperformed their respective benchmarks since the bottom of the financial crisis in 2009. In 2010, MorningStar named David Herro one of its fund managers of the decade. While David Herro was a guest host on Bloomberg Surveillance in September, he shared his three-fold formula for identifying value in the stock market More...

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