Given the relative resilience of U.S. equities, investors may find it challenging to stick with their international investments.
However, there’s ample reason to support staying the course with international equities. Some may assume these benefits lie mainly with diversifying one’s portfolio, but there’s more to international equities than just that.
Recently, Eric Liu, CFA, portfolio manager and senior international investment analyst at Harris | Oakmark, broke down the advantages of international value strategies. In particular, Liu highlighted the merits of the Harris | Oakmark international value strategy.
Keeping a Long-Term Lens
Focusing on long-term value can help investors seek competitive stocks trading at an attractive discount. When investors broaden their search globally, new value opportunities can arise.
In particular, Liu highlights the merit of investing in some French companies. When investors first look at France’s market, they may see underperformance due to political pressures and slower GDP growth.
However, investors shouldn’t simply write French companies off their portfolio. Liu noted that companies with global business models can have significantly less revenue exposure to their home country.
“There are several companies in France today that we think are quite attractive from a valuation and quality perspective,” said Liu. “There are select stocks that we own where we think there’s an opportunity for time arbitrage: where our time horizon is longer than the markets, and we’re willing to wade through today what is a weak cyclical area.”
French companies are just one example of Liu’s strategy. International value investors play the long game, capturing attractively discounted stocks that can outperform over a wider time horizon. This strategy can be especially rewarding for patient investors who are less interested in chasing trends and are more focused on fostering capital appreciation.
A Mutual Fund Can Help
The Oakmark International Fund (OAKIX) leverages the expertise of the Harris | Oakmark international strategy. On the market since 1992, this mutual fund primarily invests in a wide mix of mid- and large-cap companies outside the United States.
With a dominant focus on capital appreciation and value, OAKIX allocates investments regardless of sector or country. Instead, the mutual fund follows the Harris | Oakmark ethos, investing in discounted companies that the fund team believes will see dominant growth over time.
In the Natixis insights, Liu noted that the portfolio for OAKIX is trading at roughly a 50% discount to its intrinsic value. “Historically, when the portfolio has reached those types of attractive valuation levels, prospective returns have been quite strong,” Liu added.
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