Davis International Fund PM Commentary with Danton Goei

• Back to Video Library

• Disclaimers
• Prospectuses and Forms

Transcript

Danton Goei:

Hi everyone. I'm Danton Goei, portfolio manager of the Davis International Fund. I'd like to take a few minutes today to give you an update on the portfolio. 

We'll talk about results, the contributors and detractors to those results, as well as highlight some recent portfolio allocation decisions that we've made, and then talk about where we're seeing opportunities. Let's start with the results.

As you can see here, the Davis International portfolio had a very strong 2025, up over 30%. Now that was slightly behind the index that we've outperformed for the three years, and we know that on a longer term basis, we have some ground to make up, but let's talk about why we are very confident in the portfolio going forward.

The data here, is maybe the most important data that we'd like to share with you today, and it really talks about why we are optimistic going forward. First is the selectivity of the portfolio. We have close to 30 names in the portfolio, which is obviously much less than the close to 2000 names in the index, and that selectivity has led to a really, really strong profile. If you look in terms of the growth outlook of our companies, we are on a five-year basis. Our companies grew earnings per share at a much faster rate than the index, and yet the valuation on a PE basis is meaningfully lower than the index and really low on an absolute basis as well. That underpins why we are very optimistic in terms of our results, both on a relative, but also on an absolute basis going forward, starting with that valuation and that growth profile for our portfolio. 

Let's talk about what drove some of those recent results and also some of our capital allocation decisions.

In terms of the contributors and attractors to results, in terms of contributors, technology was certainly a strong contributor in 2025, and really, though, selectivity is key. Samsung, the leader in memory, which increasingly is important for AI, was a big contributor. Tokyo Electron, the semiconductor equipment manufacturer in Japan, that was a very big contributor. Prosus and Naspers, which own over 20% of Tencent helped in 2025. Finally, NetEase, which is the second-largest video game company in China, was a contributor. Select Financials were also contributors. Danske Bank, which is the leading bank in Denmark, Ping An Insurance, the second-largest life insurer in China, and then AIA, also a Pan-Asian life insurer, helped 2025 results. And then, industrials were also contributors. AUMOVIO, which is not a household name, but is a recent spinoff of the German auto parts manufacturer, Continental was a contributor, and then finally, Vale, the Brazilian iron ore company was also a contributor.

In terms of detractors, Meituan, which saw increased competition in the food delivery space in China, was a detractor, as well as Beike, which is the leading real estate broker and online real estate presence in China. The slow recovery of the property market there hurt results as well.

Let's go through some of the recent capital allocation decisions we've made in the portfolio, the buys and sells we made in 2025, and we'll organize it by sector.  

If we start with technology, we've had several valuation trims. Obviously, technology had a really strong '25, and so we felt that the margin of safety had narrowed in some of the names. Now, many of these names we continue to like, but we have trimmed them. Samsung, the leader in memory, Tokyo Electron, Sea Limited, which is the e-commerce leader throughout Southeast Asia was a very strong contributor, and we've trimmed some of that. Then finally Naspers as well, which owns Tencents. Those are some of the names that we've trimmed, but we continue to own the portfolio. We did sell out one name in technology Coupang. In the third quarter, we disposed of Coupang based on valuation. It's the leader in e-commerce in South Korea.

Financials also had a very strong 2025, and so we had some trims there as well. Danske Bank, the leading bank in Denmark, we trimmed, and we did sell out of DBS, which is the developed bank of Singapore, and here, really, both names is based on valuation. I mean, when we first added to Danske Bank, it was trading at well below book. Today, trading about 1.4 times book, which is still a reasonable level, but made us trim some of the Danske Bank. Then similarly with DBS, it's a high growth company, but trading at 2.3, 2.4 times book, we thought that we had better opportunities in the portfolio.

Industrials and materials are the space that we have added. We've built a new position in Vale. We really like Vale, the Brazilian iron ore producer, because on average, their iron ore has a higher percentage content of iron and less impurities than the competitors. We believe they're competitively advantaged because of the better quality iron ore that they have. AUMOVIO, the spinoff, in general, we think that spinoffs are really attractive space to look at. What's interesting about AUMOVIO is it's a German car parts manufacturer, not really high growth. Now the valuation was attractive at eight times when we bought it, so that was attractive, But they also have a JV with Aurora, the US autonomous trucking company and we believe in a couple of years, in 2028 or so, they should be rolling that out. So if that's successful, we feel like really getting a free option on that venture going forward in AUMOVIO.

In terms of ads, we've added to ITOCHU, which is the Japanese sogo shosa a trading company, basically an industrial conglomerate there, as well as Full Truck Alliance, the Chinese trucking logistics company. We felt just that those companies were trading at very low valuations offering a lot of upside.

Now the Davis International Fund is very different than the index. In one way it's different is country allocations. You can see here that we are overweight China, and we'll talk about that further, but we're really seeing attractive companies. They're trading at discounted valuations. We're also very selective about the countries that we're invested in, and so we are only in a few countries relative to the index. We really focused on countries where their economic growth, innovation, rule of law, stable governments. I think those are all very important. It's led us to focus just on a few countries.

In terms of differentiation, we're also different in terms of sectors. We're overweight consumer discretionary and financials and underweight technology. As a result, our portfolio looks very different than the index with well over 90% active share.

In terms of where we're seeing opportunities today and the perspective on global investing, 

In terms of geographies, China is one area where we are overweight and it's based on the idea that outside the US, it really is the most dynamic and innovative economy out there with a lot of global leaders in high value added industries. We just think about what China has done in terms of renewable energy with 80% of solar panels and 70% of wind turbines now manufactured in China. The fact that today the largest electric vehicle market is in China and the largest EV manufacturer is also Chinese, they've really pushed ahead a lot in innovation. And AI is also a big growth area there. So it is, we believe, an area where investors should be paying attention to. The companies there have the advantage of a huge domestic market, and increasingly they're using that scale to go international. That wasn't necessarily the case a decade ago, but that's something that we've seen increasingly in the companies that we analyze, but also the companies that we own, that they're going international and competing on a global basis. Now, there are risks, and we think that the main risk there is really geopolitical and the relationship with the rest of the world, and so that's something that we pay very close attention to.

The other area that we spend a lot of time looking at is Europe, and it really is the home to a lot of great old, established, multinational corporations with great brands, but they also have, in Europe, a lot of structural headwinds, whether it's regulatory, whether it's demographics, whether it's a cultural aversion to risk that has led to lower growth and lower innovation. And so the risk in investing in Europe is that it continues with lower growth and lower innovation, but we have been able to invest in a number of select financials there; in Denmark with the leading Danish bank in Switzerland, with one of the leading wealth managers there, Julia Spare, which is a terrific company. We have found some really attractive companies, or we've invested opportunistically there. For example, AIUMOVIO was recently spun off by Continental in the car parts industry, and that was a great opportunity for us as well.

Then we've also spent time looking at emerging markets around the world. We've recently added a number of names, and we'll talk about that in Brazil, which is a really interesting market. We are looking around the globe, but trying to stay very, very selective in terms of the countries that we're investing in.

In terms of where we're finding opportunities, what areas look attractive, and this is really an area we can also spend a long time talking about. AI, of course, artificial intelligence is a space that we're seeing a lot of opportunities with. Now, we're also very price conscious and valuation focused, and so we focused really on where are the bottlenecks in AI and who are the companies that are really solving those. One of the bottlenecks in AI is power. Natural gas is really the solution to a lot of the power demands, and we're seeing a lot of natural gas power plants being built. We own Tourmaline, which is a Canadian natural gas producer with very low cost reserves and selling both in Canada, but also exporting to the US, and they're a very large exporter to California. Data centers is definitely a growth driver for that business.

In the equipment space, it's also a real bottleneck and Tokyo Electron is one of the top semiconductor equipment companies. It's based in Japan and competes on a global basis, and there the demand also is extremely strong, driven by companies, whether it's in Taiwan or Korea or the United States, that are building fabs to build semiconductors.

Then finally, memory is also a space where we've added names. Samsung, the leader in high bandwidth memory is really being recognized as a real necessary component for AI to grow because for AI to be useful, it needs a lot of memory. There's a huge demand now for memory. Pricing is actually up close to double in recent months. There's a really, really strong demand there and the supply side looks quite attractive for the company, so we think that there's a real opportunity for Samsung there to be extremely profitable in the memory space.

In terms of China, we've made a number of investments in consumer-facing technology where they have really some of the world-leading companies in that space. Tencent, which is partially owned by Prosus and Naspers is the number one video game company, but also the leading messaging and social media company in China, and really is something that's ubiquitous that every Chinese on their mobile phone is using. Meituan, the food delivery leader in China, and DiDi, the ride sharing leader in China, are really well run companies with really good long-term growth outlooks. We like those companies a lot.

Then another space that we've looked at, a little more under the radar, is life insurance. I think life insurance in China is really interesting. It's a long-term multi-decade secular growth story there where households are pivoting away from just relying on real estate to save money and instead looking for other vehicles and life insurance and insurance products in general are really one growth area. Now, it's still at a very low level in China in terms of household savings in life insurance, and we think that's going to grow over time.

Ping An Insurance, where we just recently met with the founder and chairman, Peter Ma, who's still very vigorous at the age of 70 and running the company, is very well positioned there. They just went through a major sales force restructuring and really improved the training and quality and efficiency of that sales force. We can think that's going to pay dividends going forward, and yet it trades still only at six or seven times earnings. AIA is the other large life insurer. It's a Pan-Asian life insurer present in China, but also throughout Southeast Asia, and it actually traces its roots back to over a century ago, and so that's a very well-established, strong brand name throughout Asia in life insurance.

Finally, in industrials and materials, we've built a position in Vale, the Brazilian iron ore producer, AUMOVIO, the German car parts manufacturer, and then Full Truck Alliance as well, which is a Chinese trucking logistics company where they are increasingly taking the matching of freight and truckers and bringing that online. Historically, that's been done offline in either over the phone or in fields by the highway, obviously not the most efficient way, and so this way, it's much more efficient. All the truckers can see freight that needs to be moved, and so they're increasingly gaining share in that space, and AI, we believe, could also be a contributor to future results here by increasing efficiency.

I hope I showed you that we don't have to be just invested in, sort of, the top 10 companies in the market, that you really can find some great opportunities doing the homework and digging a little bit, traveling to go see these companies and really find great long-term opportunities there, and that's led to really strong performance in 2025. But despite that, the portfolio valuation remains very low and it's because it started at very low valuation so we think that the outlook for really strong results going forward remains very high.

And circling back to this chart here, you can see why that optimism remains, we think, well-placed in terms of the selectivity of our companies, the fact that they're growing much faster than the index, and yet are trading at meaningfully lower valuations bodes very well for future returns.

Thank you all for your time and we hope that the information we provided will be helpful as you speak to clients in the year ahead and that we provided the reasons why we are very optimistic in the portfolio and its prospects going forward. We thank you for your support and look forward to a strong 2026 and beyond.

Related Videos