Implications of the recent call for French elections

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.

Bill Nygren、David Herro · 1991 · 美国芝加哥Deep value / contrarian long-term

Theme and Background

This chapter discusses market volatility triggered by the 2024 global elections (involving 4 billion people), particularly the dissolution of the French parliament and snap elections called by President Macron after the European Parliament elections, which caused the CAC 40 index to fall 8% in one week. The author questions the correlation between short-term price fluctuations and a company's intrinsic value.

Core Thesis

The author's core investment argument is: Short-term price fluctuations are unrelated to a company's intrinsic value, which depends solely on the present value of future cash flows. Panic selling creates opportunities, not risks, for true investors. The contrarian judgment is that markets will adapt to geopolitical events (such as the Greek crisis and Brexit), and a weaker euro may actually benefit exports and tourism.

Key Arguments and Data

BNP Paribas Case: BNP Paribas, a leading French bank, fell 15% in the first two weeks of June, but the author argues that if France's ruling party shifts from centrist to right-wing, its value may not necessarily drop by 15%. The change in intrinsic value is far smaller than the market price fluctuation.
Stock Buyback Mechanism: European banks (e.g., BNP) repurchase shares at lower valuations through buyback programs when stock prices decline, which is highly value accretive.
Historical Analogy: Markets successfully adjusted after the Greek crisis and Brexit, indicating that the impact of geopolitical events is temporary.
Currency Effect: A weaker euro may benefit currency-sensitive sectors such as exporters and tourism.

Event/Indicator	Data
Number of participants in 2024 global elections	4 billion
CAC 40 index one-week decline	8%
BNP Paribas decline in the first two weeks of June	15%
BNP Paribas weight in Oakmark International Fund (as of 2024/3/31)	4.0%

Companies/Assets Involved

BNP Paribas: A leading French bank and a top holding of the Oakmark International Fund (4.0% of net assets). The author is bullish, arguing that the 15% stock price decline is an overreaction and that the buyback program is more value accretive at lower prices.
European Banks (in general): Banks like BNP with active stock buyback programs, which the author believes can benefit from stock price declines.

Investment Implications

Capitalize on Panic Selling: Investors should ignore short-term geopolitical noise and focus on a company's long-term cash flow generation ability. When markets experience irrational declines due to events like elections, these should be viewed as buying opportunities.
Focus on Buyback Programs: Hold or buy companies with active stock buyback programs (e.g., European banks), as falling stock prices enhance the value accretion of buybacks.
Currency-Sensitive Sectors: When the euro weakens, consider exporters and tourism stocks, which may benefit from currency movements.