Dodge & Cox Global Stock Fund's 2nd-Quarter Commentary

Market Commentary

Global equities continued to appreciate in the second quarter, after performing strongly in the first quarter of 2023. During the first half of 2023, the MSCI ACWI Index posted a total return of 13.9%, a resilient performance amid macroeconomic uncertainty, geopolitical concerns, and heightened volatility.

Global growth stocks2 outperformed value stocks by 20.0 percentage points during the first half of the year.3 The growth-oriented Information Technology and Communication Services sectors outperformed, while the value-oriented Energy, Real Estate, and Materials sectors underperformed. Notably, seven large technology-related companies (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla), which together represented only 13.9% of the MSCI ACWI, accounted for about half of the Index’s total return.4

With the recent rise in certain growth stocks, the valuation gap between value and growth stocks has widened: the MSCI ACWI Value Index5 now trades at 12.0 times forward earnings6 compared to 24.5 times for the MSCI ACWI Growth Index.7 In addition, international equities continue to trade at a substantial discount to U.S. equities: 13.0 times forward earnings for the MSCI EAFE Index, compared to 20.1 times for the S&P 500 Index.8

Portfolio Strategy

During the first half of 2023, we trimmed areas of the Fund that saw their valuations increase, such as Information Technology and Communication Services (notable examples included Meta, Baidu, and NetEase9). We also trimmed outperformers such as General Electric and FedEx. We leaned into areas of the market with more attractive valuations, including Financials (where we started a position in Truist Financial) and Transportation (where we initiated a position in Norfolk Southern).

Relative to the MSCI ACWI, the Fund continues to be overweight Financials and underweight Information Technology. Regionally, the Fund continues to be overweight international and underweight the United States. These relative weights are the culmination of our bottom-up research process, which focuses on individual security selection within the context of broader market conditions. For example, within Financials, we believe the incidents earlier this year involving a few U.S. regional banks were idiosyncratic and isolated in nature, and not emblematic of problems in the broader global banking system. We continue to evaluate the risk exposures, capital strength, and earnings capacity of the Fund’s Financials holdings, and view the potential for capital return and valuation rerating to be quite significant.

The global economy currently faces challenges, including elevated inflation and rate hikes across several major economies, as well as uncertainty around China’s economic recovery. This also presents opportunities, and the Fund’s diversified portfolio trades at only 10.5 times forward earnings, a discount to the MSCI ACWI at 16.3 times. Our long-tenured team has navigated similar challenges before, and we encourage shareholders to remain focused on the long term. Thank you for your continued confidence in Dodge & Cox.

Performance Review (Fund’s Class I Shares vs. MSCI ACWI) Second Quarter

Key contributors to relative results included the Fund's:

• Financials holdings, including XP (XP, Financial), Itau Unibanco (ITUB, Financial), Axis Bank (BOM:532215, Financial), and Standard Chartered (LSE:STAN, Financial);
• Industrials holdings (up 11% compared to up 6% for the MSCI ACWI sector), such as Mitsubishi Electric (TSE:6503, Financial);
• Communication Services holdings, notably Alphabet (GOOG, Financial); and
• Positions in VMware (VMW, Financial), Coherent (COHR, Financial), and Teck Resources (TECK, Financial).

Key detractors from relative results included the Fund's:

• Underweight position in Information Technology, including underweight holdings, such as Microsoft (MSFT, Financial);
• Consumer Discretionary holdings (down 2% compared to up 9% for the MSCI ACWI sector), including Alibaba (BABA, Financial) and Prosus (XAMS:PRX, Financial);
• Health Care holdings—particularly Incyte (INCY, Financial) and Regeneron (REGN, Financial)—and overweight position in the sector;
• Energy holdings, including Occidental Petroleum (OXY) and Suncor Energy (SU), due to negative stock selection and an overweight position in the sector; and
• Positions in Anheuser-Busch InBev (BUD), Nutrien (NTR), and Jackson Financial (JXN).

Year to Date

Key contributors to relative results included the Fund's:

• Industrials holdings (up 31% compared to up 13% for the MSCI ACWI sector), particularly General Electric (GE), FedEx (FDX), and Mitsubishi Electric;
• Overweight position in Communication Services and specific holdings, such as Alphabet (GOOG, Financial) and Meta Platforms (META); and
• Positions in XP and Fresenius Medical (FMS).

Key detractors from relative results included the Fund's:

• Underweight position in Information Technology, including underweight holdings, such as Microsoft;
• Consumer Discretionary holdings (up 10% compared to up 25% for the MSCI ACWI sector), including JD.com (JD);
• Energy holdings—specifically Ovintiv (OVV), Occidental Petroleum, and Suncor Energy—and overweight position in the worst-performing sector of the market; and
• Positions in Charles Schwab (SCHW) and Incyte.

1. All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ total returns include the reinvestment of dividend and capital gain distributions, but have not been adjusted for any income taxes payable by shareholders on these distributions or on Fund share redemptions. Index returns include dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. The MSCI ACWI (All Country World Index) Index is a broad-based, unmanaged equity market index aggregated from developed market and emerging market country indices.
2. Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks.
3. For the six months ended June 30, 2023, the MSCI ACWI Value Index had a total return of 4.3% and the MSCI ACWI Growth Index had a total return of 24.3%.
4. Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla had a combined average weight of 13.9% in the S&P 500 Index during the first half of 2023.
5. The MSCI ACWI Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across developed market and emerging market countries. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield.
6. Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change.
7. The MSCI ACWI Growth Index captures large- and mid-cap securities exhibiting overall growth style characteristics across developed market and emerging market countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend, and long-term historical sales per share growth trend.
8. The MSCI EAFE (Europe, Australasia, Far East) Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, excluding the United States and Canada. The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market.
9. The use of specific examples does not imply that they are more or less attractive investments than the Fund’s other holdings.

The information provided is not a complete analysis of every material fact concerning any market, industry or investment. Data has been obtained from sources considered reliable, but Dodge & Cox makes no representations as to the completeness or accuracy of such information. The information provided is historical and does not predict future results or profitability. This is not a recommendation to buy, sell, or hold any security and is not indicative of Dodge & Cox’s current or future trading activity. Any securities identified are subject to change without notice and do not represent a Fund’s entire holdings. Dodge & Cox does not guarantee the future performance of any account (including Dodge & Cox Funds) or any specific level of performance, the success of any investment decision or strategy that Dodge & Cox may use, or the success of Dodge & Cox’s overall management of an account.

The Fund invests in securities and other instruments whose market values fluctuate within a wide range so your investment may be worth more or less than its original cost. International investing involves more risk than investing in the U.S. alone, including currency risk and a greater risk of political and/or economic instability; these risks are heightened in emerging markets. The Fund may use derivatives to create or hedge investment exposure, which may involve additional and/or greater risks than investing in securities, including more liquidity risk and the risk of a counterparty default. Some derivatives create leverage.

Before investing in any Dodge & Cox Fund, you should carefully consider the Fund’s investment objectives, risks, and charges and expenses. To obtain a Fund’s prospectus and summary prospectus, which contain this and other important information, or for current month-end performance figures, visit dodgeandcox.com or call 800-621-3979. Please read the prospectus and summary prospectus carefully before investing.