Oakmark is the mutual fund family launched in 1991 by Harris Associates, the Chicago deep-value firm founded in 1976 (about $105bn AUM). Bill Nygren runs the flagship Oakmark Fund and David Herro the Oakmark International Fund, buying businesses at large discounts to intrinsic value and holding them like owners — publishing quarterly fund commentaries, market commentaries and insight articles.
This article argues that international stocks (like Europe and Japan) are much cheaper than US stocks—a P/E ratio of 13 vs. 21. (P/E is price divided by earnings, so lower is better.) International stocks also offer a higher earnings yield than US Treasury bonds, giving investors a nice risk premium—extra return for taking stock risk. For regular investors, this means shifting some money from expensive US stocks to cheaper international ones could boost returns. Worth a read because it uses data to challenge the US-only hype and reminds us that diversification makes portfolios safer.
Oakmark Co-Chief Investment Officer Tony Coniaris believes that now is a good time for investors to reconsider diversifying their portfolios with international stocks. The report points out that international stocks are more attractively valued relative to U.S. stocks: the MSCI EAFE Index has a pric
This section is authored by Tony Coniaris, Co-Chief Investment Officer (International Equities) and Portfolio Manager at Oakmark. The core argument is that in the current market environment, investors should reassess the diversification value of international equities within their portfolios. The report is set against the backdrop of a significant valuation gap between international and U.S. stocks, presenting a potential entry opportunity for long-term investors.
The author explicitly argues that now is a good time for investors to reconsider using international equities to diversify their portfolios. The core judgment is based on the low valuations and relatively higher expected returns of international stocks, which contrasts with the prevailing market consensus favoring U.S. stocks (especially large-cap tech stocks).
The author supports the thesis through valuation comparisons and risk premium analysis. Key data points are as follows:
| Indicator | International Stocks (MSCI EAFE) | U.S. Stocks (S&P 500) |
|---|---|---|
| Price-to-Earnings (P/E) Ratio | Approximately 13x | Approximately 21x |
| Earnings Yield | Approximately 7.7% | Not directly provided |
| Equity Risk Premium (vs. U.S. 10-Year Treasury) | Approximately 3.2% | Not directly provided |
This section does not mention specific companies but focuses on index-level analysis:
For investors, this means that against the backdrop of high U.S. stock valuations (P/E of 21x), increasing allocation to international stocks (P/E of 13x) may yield higher expected returns. The specific direction is: consider shifting some capital from U.S. stocks to the international developed markets covered by the MSCI EAFE Index, in order to capitalize on the risk premium offered by their lower valuations and higher earnings yields.