Dodge & Cox funds are managed via a team approach; this fund, which has been added to our conservative model portfolio, has an investment team of seven members with an average tenure at the firm of 18 years, explains Walter Frank, editor of MoneyLetter.
The team at Dodge & Cox Global Stock (DODWX) starts with a broad viewing of mid- to large-cap, well-established firms in established and emerging markets. Normally, it will invest at least 40% of fund assets outside the US.
As with other Dodge & Cox funds, valuation is at the root of investing, with the managers looking for stocks that appear temporarily undervalued, but which have a strong outlook for long-term growth.
Naturally, underlying company fundamentals are critical as well. This includes an assessment of financials, competitive advantages, business franchise, management expertise, etc.
Currently, the portfolio has assets invested in 23 different nationals and 92 individual holdings. As evidence of its long-term focus, recent annual portfolio turnover was 24% (compared to 65% for Morningstar's world stock category).
Notably, it also had a significantly higher commitment to emerging markets (18%) compared to both the benchmark and the category.
In the first half of this year, the fund's energy and industrial holdings, in particular, aided fund performance.
Looking at individual holdings, the number one and two stocks in the portfolios—Hewlett-Packard (HPQ) and Microsoft (MSFT)—have been strong year-to-date performers.
Two other stocks are notable also for the managers’ commitment during bleak times: India bank ICICI (IBN) and emerging markets Internet stock Naspers (NPSNY).
While the fund has certainly had its times of underperformance when its contrarian picks are suffering, over the long haul, patience has paid off.
Through the end of August, the fund is within the top decline of its category for the year-to-date and for the trailing one and three year periods.
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