Despite recent market turmoil largely related to the subprime mortgage crisis, we believe that attractive opportunities have been created in a few well-run Financial companies. One example is American International Group. We are excited to have the opportunity to hold this global insurance industry leader, now trading at about 10 times expected 2008 earnings. Another opportunity is HSBC Holdings, a leading global bank with a strong position in emerging markets which was purchased in the second quarter.
AIG and HSBC illustrate opportunities in “megacaps,” one of the Fund’s current investment themes. The weighted average market capitalization of the Fund’s portfolio is now $87 billion, still smaller than the S&P 500 average of $111 billion, but well above the $17 billion weighted average market cap of the Fund’s holdings at year-end 2000. In our view, a number of the largest companies in the market have become attractive at current valuations.
In spite of the Fund’s underperformance this quarter, we remain quite optimistic about global economic growth and long-term prospects for the portfolio. As we have discussed before, periods of heightened market volatility often lead to long-term investment opportunity. During such periods, we are guided by our investment compass: invest with a long-term time horizon, use our strict valuation discipline, and focus on individual company analysis while paying attention to the possible downside risk for each holding’s earnings and cash flow. This fundamental approach has guided Dodge & Cox throughout many markets, and we will continue to utilize it diligently on your behalf in the years ahead.
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Commentaries from International Fund
When selecting investments for the Fund, we focus on understanding the current condition of a company in relation to its valuation. Our global industry analysts conduct extensive research into each prospective investment and actively monitor each holding in the Fund. We seek to understand the durability of a business and its ability to withstand operational and financial adversity. In addition, we employ a strict valuation discipline and try to assess if management is running the company for the benefit of long-term shareholders.
Using this approach, we viewed the concerns in the credit markets resulting from subprime mortgage-related losses as an opportunity to add to our Financials investments. We added to several holdings in wellcapitalized companies including Credit Suisse, HSBC, Mitsubishi UFJ and Bank of Yokohama. We also increased our holdings in European pharmaceutical companies, such as GlaxoSmithKline, Novartis and Sanofi, which are presently trading at attractive valuations. Despite the Fund’s underperformance in the third quarter, we remain optimistic about the long-term prospects for the portfolio.
Read the complete commentary of International Fund
AIG and HSBC illustrate opportunities in “megacaps,” one of the Fund’s current investment themes. The weighted average market capitalization of the Fund’s portfolio is now $87 billion, still smaller than the S&P 500 average of $111 billion, but well above the $17 billion weighted average market cap of the Fund’s holdings at year-end 2000. In our view, a number of the largest companies in the market have become attractive at current valuations.
In spite of the Fund’s underperformance this quarter, we remain quite optimistic about global economic growth and long-term prospects for the portfolio. As we have discussed before, periods of heightened market volatility often lead to long-term investment opportunity. During such periods, we are guided by our investment compass: invest with a long-term time horizon, use our strict valuation discipline, and focus on individual company analysis while paying attention to the possible downside risk for each holding’s earnings and cash flow. This fundamental approach has guided Dodge & Cox throughout many markets, and we will continue to utilize it diligently on your behalf in the years ahead.
Read the complete commentary of Stock Fund
Commentaries from International Fund
When selecting investments for the Fund, we focus on understanding the current condition of a company in relation to its valuation. Our global industry analysts conduct extensive research into each prospective investment and actively monitor each holding in the Fund. We seek to understand the durability of a business and its ability to withstand operational and financial adversity. In addition, we employ a strict valuation discipline and try to assess if management is running the company for the benefit of long-term shareholders.
Using this approach, we viewed the concerns in the credit markets resulting from subprime mortgage-related losses as an opportunity to add to our Financials investments. We added to several holdings in wellcapitalized companies including Credit Suisse, HSBC, Mitsubishi UFJ and Bank of Yokohama. We also increased our holdings in European pharmaceutical companies, such as GlaxoSmithKline, Novartis and Sanofi, which are presently trading at attractive valuations. Despite the Fund’s underperformance in the third quarter, we remain optimistic about the long-term prospects for the portfolio.
Read the complete commentary of International Fund
