Herro Still Keen on Europe

While many investors continue to avoid European stocks amid the continent’s debt crisis, top fund managers David Herro and Rob Taylor are still betting big on European stocks.

In their third-quarter letter to Oakmark International fund shareholders, Herro and Taylor say that 70% of their fund — which has trounced the broader market over the long haul — is in European stocks. Another 24% is in another unloved region — Japan. Of the remainder, 4% is in Australia and the rest is in North America.

In separate commentary, Herro talks about what he thinks has made his funds so successful over the long haul. “As a group, we believe that we have been successful for three reasons,” he says. “First, we utilize a sound investment philosophy that defines our value-investing concept as one which notionally includes both low price and high quality; second, we execute this philosophy and approach in an extremely disciplined manner; and third, we have a group of investment professionals that not only improve over time but truly work as a team.” He adds that learning from mistakes — but not “overcorrecting” because of them — is also crucial.

Herro also says it’s critical to focus on cold, hard, company-specific facts and figures. “We stubbornly make decisions based on company fundamentals rather than macroeconomic worries and market volatility,” he says. “We don’t try to predict the Fed’s next move or on which cheek Hollande will kiss Merkel. We believe that investment success comes from correctly assessing business value, not from correctly predicting macro trends.” (his emphasis)