David Herro  International Stock Fund Manager of the Decade

Fortune Finance of David Herro
Fortune Finance of David Herro

This is a very good profile from Fortune Finance of David Herro who is “The man whom Morningstar crowned international stock fund manager of the decade in 2010.”

Herro is a “bottom up” value and contrarian investor who is currently betting big on European banks.  The profile talks about his life, his previous investing successes, his investment philosophy, and why he thinks European banks are selling at a huge discount.

Here’s the article and hope you enjoy:

Foreign Equity
David Herro
Oakmark International: 8.2%*; Category Average: 3.2%*
Oakmark International Small Cap: 10.1%*; Category Average: 6.1%*

Eclectic. Contrarian. Right. That pretty much sums up David Herro’s investment strategy and execution. Herro is a deep-value investor at heart, who focuses on 50 to 60 stocks and readily loads up on individual sectors and markets when he thinks they’re packed with compelling bargains. Both of his funds, therefore, are relatively compact and normally look quite unlike their relevant benchmarks and peers. In fact,  Oakmark International (OAKIX) currently has a huge media weight, a hefty business-services position, and a Switzerland stake that is nearly 4 times the foreign large-value average of 6%. Herro showed his contrarian stripes in late 2008 by scooping up luxury goods companies in both funds when investors were fleeing consumer discretionary stocks in droves, especially those focused on the high end. And though both funds have modest weightings in emerging markets right now, they have had substantial stakes in the developing world at various times in the past when Herro has spied opportunities.

Herro’s distinctive and rather bold value strategy comes with significant risks, and both of his funds have endured poor years only to bounce back smartly. The two funds finished in the cellars of their categories in 2007, for example, partly because his strict valuation discipline led him to almost completely ignore the red-hot energy and commodity-related industries. But those same standards helped both funds hold up reasonably well relative to peers in 2008’s terrible meltdown and helped them shine in 2009’s sharp rebound. Indeed, Oakmark International gained 56% and outpaced nearly all its foreign large-value peers last year, while  Oakmark International Small Cap (OAKEX) returned 68% and finished near the top of the foreign small/mid-value group in 2009.

 More importantly, Herro and his comanagers have delivered impressive results over time at both funds with this hard-core value style. The funds’ results over the past 10 years are anything but flukes. The two funds have posted superior results in all of the rolling 10-year periods since their inceptions in the mid-1990s.
 *10-Year Annualized Returns through 12/31/09