Oakmark International Fund: Fourth Quarter 2025

Theme and Background

This chapter summarizes the performance of the Oakmark International Fund in the fourth quarter of 2025, including key contributors and detractors, regional allocation changes, and newly purchased and liquidated positions. The report notes that although the fund underperformed its benchmark in the quarter, it maintained excess returns for the full year and since inception. International markets remain attractively valued, with investment opportunities shifting toward more stable, high-quality companies.

Core Thesis

The author’s core investment argument is: Many international markets remain attractively valued, and the fund is leveraging cyclical downturns and excessive market concerns to increase holdings in high-quality, stable-growth companies with long-term revaluation potential. Counterintuitive judgments include: for Alibaba, despite short-term subsidy drags on earnings, the author believes its long-term AI positioning and core e-commerce advantages are not fully priced in; for IMCD, despite a cyclical decline, the author argues that its pricing power and demand resilience are undervalued by the market.

Key Arguments and Data

Performance Comparison: The fund (Investor Class) underperformed the MSCI World ex USA Index in the quarter but outperformed on a full-year and since-inception basis.
Regional Allocation: The top three regions are Europe ex-UK (68.1%), UK (13.8%), and Asia ex-Japan (8.7%), with emerging markets accounting for 10.2%.
Quarterly Contribution: Germany, Switzerland, and France were the largest contributing regions; China, the US, and Ireland were the largest detracting regions.
Sector Contribution: Healthcare and financials were the largest contributing sectors; consumer staples were the only detracting sector.
Valuation Logic for New Buys:
IMCD: The stock fell sharply due to a cyclical downturn and “excessive market concerns,” but the company has significant pricing power and demand resilience (in “true specialties” areas), along with ample M&A opportunities. The author believes it should be revalued over the long term.
AstraZeneca: Shares trade below the author’s estimated intrinsic value due to US regulatory concerns, but its marketed product portfolio and late-stage pipeline (e.g., lung and breast cancer drugs) offer attractive growth prospects.
Sanofi: Under pressure from vaccine market volatility, patent cliff concerns, and unrecognized pipeline value, but management is actively investing in R&D. The author sees significant growth potential as the vaccine market normalizes.
Symrise: Recent underperformance due to earlier organic growth stagnation, but the company benefits from industry consolidation structure and customer stickiness (ingredients are low-cost but critical). With management refocusing on profitability and cash flow, the stock trades significantly below intrinsic value.
Unilever: Volume growth of only 1% over the past decade due to mismanagement, resulting in a discount to peers. However, new management is driving cost savings and brand divestitures, which could unlock value.

Companies/Assets Involved

Company/Asset	Role	Key Data/Event	Bullish/Bearish
Bayer	Largest quarterly contributor	Stroke drug Asundexian Phase III trial met primary endpoint; US Solicitor General recommended Supreme Court hear RoundUp appeal	Bullish (supports investment thesis)
Alibaba Group	Largest quarterly detractor	Core e-commerce performed well, cloud revenue growth accelerated; but Quick Commerce subsidy spending weighed on earnings	Bullish (long-term AI positioning and leadership)
IMCD NV	New buy	Global specialty chemicals distribution leader; stock fell sharply due to cyclical downturn and “excessive market concerns”	Bullish (pricing power, demand resilience, M&A opportunities)
AstraZeneca ADR	New buy	Global large-cap pharma; shares trade below intrinsic value due to US regulatory concerns	Bullish (marketed product portfolio, late-stage pipeline, management team)
Sanofi	New buy	Global pharma company; under pressure from vaccine market volatility and patent cliff concerns	Bullish (R&D investment, growth after vaccine market normalization)
Symrise	New buy	Global leader in flavors, fragrances, and specialty ingredients; underperformed due to earlier organic growth stagnation	Bullish (industry structure, customer stickiness, earnings inflection point)
Unilever	New buy	Global consumer goods company; shares trade at a discount due to only 1% volume growth over the past decade	Bullish (new management, cost savings, brand divestitures)
DSV	Quarterly contributor	No specific data provided	Bullish
Samsung Electronics Pfd	Quarterly contributor	No specific data provided	Bullish
CNH Industrial	Quarterly detractor	No specific data provided	Bearish
Dassault Systemes	Quarterly detractor	No specific data provided	Bearish
Exor	Liquidated	No specific data provided	Bearish
Komatsu	Liquidated	No specific data provided	Bearish

Investment Implications

Increase holdings in high-quality, stable-growth international companies: The fund is shifting from cyclical opportunities to more stable companies such as AstraZeneca, Sanofi, Symrise, and Unilever. These are undervalued due to short-term market concerns or management missteps but have long-term growth and revaluation potential.
Use cyclical downturns to build positions in specialty chemicals distribution: The IMCD case shows that buying industry leaders with pricing power and demand resilience during cyclical troughs can yield long-term excess returns.
Focus on long-term AI value in Chinese tech companies: Despite Alibaba’s short-term pressure from subsidies, the author believes its early AI investments and leading market position will unlock long-term value, allowing investors to look past near-term earnings volatility.
Beware of drag from consumer staples: This sector was the only detractor, indicating that traditional consumer goods companies face growth bottlenecks. Investors should monitor management changes and cost optimization (e.g., Unilever).