December 6, 2021


The travel folks

Dodge & Cox Global Stock Fund’

7 min read

The Dodge & Cox International Stock Fund experienced a complete return of –3.4% for the 3rd quarter of 2021, as opposed to flat for the MSCI World Index. For the nine months ended September 30, 2021, the Fund had a whole return of 16.9%, as opposed to 13.% for the MSCI Planet.

Investment Commentary

Right after appreciating for three consecutive quarters, world wide equity marketplaces ended up effectively flat in the third quarter of 2021, and the MSCI Earth Price Index a bit pulled back relative to the MSCI Globe Progress Index, amid the distribute of the COVID-19 Delta variant. In general, not considerably has modified, and we continue to notice that pieces of the industry provide powerful chances for lively, worth-oriented financial investment professionals like Dodge & Cox.

As we have observed right before, the valuation gap among value and expansion shares2 stays remarkably broad. In point, it has almost returned to its peak from this January. The MSCI World Benefit trades at 13.7 situations forward earnings in comparison to 28.3 moments for the MSCI Globe Expansion.3 The Financials, Electrical power, and Products sectors are demonstrably more cost-effective than the relaxation of the sector and continue to be significant chubby areas of the MSCI Globe Benefit.

Likewise, and considerably connected, stocks that profit from higher premiums trade at historically wide discount rates to stocks that reward from decreased rates. If fascination premiums increase in coming many years, this will be a headwind to a lot of advancement shares that have benefited from reduced price cut prices, and really should advantage sections of the worth universe, these kinds of as Financials.

Global markets also keep on to be priced at a significant price cut to U.S. marketplaces. The S&P 500 Index trades at 20.8 periods ahead earnings in contrast to 15.3 occasions for the MSCI EAFE Index and 12.6 periods for the MSCI Rising Markets Index. Rising sector valuations have been impacted by China, which has tumbled 17% 12 months
to date amid worries about the Chinese government’s greater laws across various industries. The government’s attempts to pursue prevalent prosperity have disproportionately affected education and World-wide-web companies so much. China web shares, as described by the CSI Overseas China World-wide-web Index, have dropped 54% from their peak in February 2021 as a result of September 30, substantially lagging equally the MSCI ACWI ex United states Index (down 1%) and the NASDAQ 100 Index (up 8%).4

At Dodge & Cox, we seem past headlines to evaluate regardless of whether valuations correctly mirror risk and option or are both much too pessimistic or optimistic. We carry out comprehensive, in-depth thanks diligence and update our pondering to incorporate shorter-expression and prolonged-expression economic impacts as details improve. In addition, we include the experience and judgment of a seasoned expenditure crew to develop the insights and views that help us to make conviction.

We have located what we feel are hugely appealing opportunities across the market place, usually in places that acquire the most debate. Constructed on a base-up basis, the Fund continues to be chubby Financials and Electricity primarily based on minimal valuations that reflect overly pessimistic expectations for foreseeable future earnings and return of money to shareholders. The
Fund is also obese businesses with analysis and improvement-pushed earnings progress, this sort of as in Health Care (18.% of the Fund) and China Internet5 (5.8% of the Fund).

In Overall health Care, we have additional to the Fund’s pharmaceutical holdings calendar year to day specified their powerful valuations and powerful innovation pipelines which need to drive appealing earnings growth more than the coming several years. We also started off a new placement in Fresenius Clinical Treatment (FMS, Financial) 6 (the world’s major vertically integrated service provider of dialysis
merchandise and services) at an interesting valuation relative to its respective franchise power and current market main posture.

We extra to the Fund’s China World-wide-web holdings in Alibaba (BABA, Economic), Baidu (BIDU, Fiscal), and (JD, Economical) just after examining regulatory modifications, revisiting the danger-reward outlook, and using into account the major pullback in the team. We identify that we do not have a crystal ball when it comes to predicting future alterations in regulations. However, the subsequent components weighed in favor of raising the Fund’s publicity to these holdings. Initially, several of the government’s steps are really very similar to information privateness and anti-monopoly insurance policies that can by now be observed in other marketplaces around the globe. Next, authorities officials and publications have arrived at out to buyers to clarify the government’s agenda, and pressured the government’s assistance of non-public organization. Third, these companies’ valuations now embed a great deal additional conservative assumptions for advancement and profitability.

Heading ahead, we continue to be optimistic about the long-term outlook for the Fund’s portfolio. At 11.5 instances ahead earnings, the Fund trades at a considerable lower price to the total market place and remains obese minimal-priced stocks that ought to gain from accelerating economic development. Even with considerations about the COVID-19 Delta variant, the financial restoration remains on monitor, and thriving vaccination initiatives have innovative the timeframe for easing the impression of the COVID-19 pandemic. For a longer period time period, variants will most likely be more manageable because of to vaccine efficacy, novel therapies, and high ranges of immunity.

As normally, we continue being concentrated on the lengthy phrase, and we encourage our shareholders to do the exact. Thank you for your ongoing self confidence in Dodge & Cox.

Third Quarter Performance Evaluate

The Fund underperformed the MSCI Environment by 3.4 share points during the quarter.

Essential Detractors from Relative Outcomes

  • The Fund’s Wellbeing Treatment holdings (down 6% compared to up 1% for the MSCI Entire world sector) hindered effects. Sanofi (SNY, Financial) and Novartis (NVS, Financial) have been detractors.
  • The Fund’s relative outcomes in the Consumer Discretionary sector (down 19% compared to down 1% for the MSCI Entire world sector) also detracted. Alibaba and Naspers (JSE:NPN, Financial) underperformed.
  • Supplemental detractors bundled FedEx (FDX, Financial), Baidu, and Grupo Televisa (Television, Economic).

Important Contributors to Relative Results

  • The Fund’s relative success in the Elements sector (up 5% compared to down 5% for the MSCI Planet sector) aided effects. Glencore (LSE:GLEN, Money) and Nutrien (NTR, Money) have been contributors.
  • The Fund’s normal obese position in the Financials sector (26% compared to 13% for the MSCI Earth sector) also contributed. ICICI Lender (IBN, Financial), Aegon (AEG, Money), Barclays (LSE:BARC, Money), Capital One particular Money (COF, Economic), and Wells Fargo (WFC, Economical) done properly.
  • More contributors integrated Dell Systems (DELL, Financial) and Ovintiv (OVV, Fiscal).

Year-to-Date General performance Critique

The Fund outperformed the MSCI Environment by 3.9 share factors yr to date.

Key Contributors to Relative Results

  • The Fund’s relative returns in the Power sector (up 58% in comparison to up 34% for the MSCI Entire world sector) and an ordinary chubby situation (7% as opposed to 3%) contributed considerably to outperformance. Ovintiv, Occidental Petroleum (OXY, Economical), and Suncor Electricity (SU, Money) ended up robust performers.
  • The Fund’s ordinary obese place in the Financials sector (27% versus 14% for the MSCI World sector) also meaningfully helped success. Wells Fargo, Funds One Monetary, and ICICI Financial institution outperformed.
  • Dell Technologies was also among the the major contributors.

Vital Detractors from Relative Effects

  • The Fund’s holdings in the Shopper Discretionary sector (down 17% in comparison to up 9% for the MSCI Entire world sector) harm final results. Alibaba was a important detractor.
  • Inventory selection in the Wellbeing Treatment sector (up 4% as opposed to up 11% for the MSCI Earth sector) was also a drag on relative overall performance. Novartis and Sanofi underperformed.
  • Extra detractors bundled Credit Suisse (CS, Economical), FedEx, Itau Unibanco (ITUB, Monetary), Credicorp (BAP, Fiscal), and Baidu.

1The Fund’s total returns include the reinvestment of dividend and capital achieve distributions, but have not been
modified for any revenue taxes payable by shareholders on these distributions or on Fund share redemptions.
Index returns involve dividends but, compared with Fund returns, do not mirror charges or expenses. The MSCI World
Index is a broad-based mostly, unmanaged equity market place index aggregated from 23 Made Market place region
indices, such as the United States. Results replicate dividends internet of withholding taxes. MSCI makes no
convey or implied warranties or representations and shall have no liability in any respect with respect to any
MSCI information contained herein. The MSCI info may perhaps not be further redistributed or utilized as a foundation for other
indices or any securities or economical products. This report is not accredited, reviewed, or produced by MSCI. All
returns are mentioned in U.S. pounds, unless if not noted.

2 Frequently, stocks that have decreased valuations are deemed “value” shares, although those people with higher valuations
are thought of “growth” stocks.

3 Unless of course usually specified, all weightings and characteristics are as of September 30, 2021.

4 The NASDAQ 100 Index is a inventory current market index manufactured up of equity securities issued by 100 of the greatest nonfinancial corporations mentioned on the Nasdaq stock current market. This Index incorporates several of the China World wide web companies’counterparts in the United States.

5 China Web includes Alibaba, Baidu,, Naspers, and Prosus.

6 The use of certain illustrations does not suggest that they are additional or much less attractive investments than the portfolio’s other holdings.

Returns signify earlier functionality and do not warranty upcoming final results. Financial investment return and share price tag will fluctuate with market place circumstances, and investors may possibly have a acquire or reduction when shares are marketed. Fund functionality improvements over time and at this time could be considerably lessen than said previously mentioned. Effectiveness is updated and printed every month. Take a look at the Fund’s internet site at or contact 800-621-3979 for latest month-stop effectiveness figures. All rights reserved. | Newsphere by AF themes.