Oakmark International Fund: First Quarter 2026

Theme and Background

This chapter primarily discusses the performance of the Oakmark Fund in the first quarter of 2026, portfolio changes, and the assessment of the market environment. The report notes that the current stock market is driven by short-term noise, geopolitical headlines, and extreme stock divergence, rather than corporate intrinsic value. Therefore, the fund adheres to a patient and disciplined investment strategy.

Core Views

The author's core investment thesis is: The current market is dominated by short-term herd behavior, not fundamentals. Hence, the fund focuses on companies whose stock prices are significantly below intrinsic value, waiting for long-term value to revert. Counterintuitive judgments include the belief that the AI risk for Dassault Systèmes is misjudged by the market, as its physical simulation software possesses a unique moat; and that enterprise software companies like SAP and LSEG, after being pressured by the AI narrative, are trading at historically low valuations, yet their actual business moats remain solid.

Key Arguments and Data

Performance: The fund (Investor Class) underperformed its benchmark, the MSCI World ex USA Index, this quarter, but has still outperformed since inception.
Regional Allocation: Europe ex-UK accounted for 63.7%, the UK 15.4%, Asia ex-Japan 8.8%, and Emerging Markets 10.4%. This quarter, South Korea, Switzerland, and Mexico contributed the most, while France, Germany, and the UK were the biggest detractors.
Sector Contribution: The Industrials and Materials sectors contributed the most, while Consumer Discretionary and Information Technology sectors were the biggest detractors.
Glencore: The stock rose due to merger discussions with Rio Tinto, strong Q4 copper production, and higher-than-expected dividends. Although the merger was terminated, the report argues that the company has significant exposure to and growth in copper assets, strong cash flow from coal operations, differentiated marketing capabilities, and a shareholder-friendly management team.
Dassault Systèmes: Weak Q4 results and cautious 2026 guidance led to a stock decline, compounded by the "SaaSpocalypse" narrative that depressed valuations for enterprise software. However, the report argues that its physical simulation software requires proprietary simulation datasets, which general large models cannot easily replace, and the company is rolling out multimodal AI capabilities. Its valuation is near a decade low.
New Purchases:
Compass Group: A global leader in contract food services, with resilient recurring revenue, scale advantages, and operational excellence. However, the stock is under pressure due to the end of the post-pandemic recovery and AI-related employment concerns.
Coupang: A leading e-commerce company in South Korea, with a vertically integrated logistics model (the "Rocket WOW" system) offering next-day/same-day delivery. The stock fell sharply due to a cyberattack incident.
Haleon: One of the world's largest consumer healthcare companies, owning brands like Sensodyne and Advil. As an independent entity, management is focusing on efficiency, but the stock is suppressed by technical pressures and fundamental misunderstandings.
SAP: A global ERP leader, with an accelerating trend of customer migration to the cloud. However, the market worries that AI will weaken demand for enterprise software. The report argues that its scale, data ownership, and definition of customer workflows make it irreplaceable.
LSEG: A vertically integrated multi-asset trading infrastructure and data company, owning monopoly/oligopoly assets like the London Stock Exchange, LCH, and TradeWeb. Revenue is primarily contractual and recurring. However, the stock fell to a decade low due to AI competition concerns.
Unicharm: A global personal care company, pressured by intensified competition in China and Southeast Asia. However, profit contribution from these two regions has already fallen from a peak of approximately 40% to about 20%, while its U.S. pet care and Japanese businesses remain robust.

Companies/Assets Involved

Company	Role	Key Data	Bullish/Bearish
Glencore	Top Contributor	Strong Q4 copper production, dividends above expectations	Bullish
Dassault Systèmes	Top Detractor	Weak Q4 results, cautious 2026 guidance, valuation near decade low	Bullish (AI risk misjudged)
Compass Group	New Purchase	Global leader in contract food services, stock pressured by AI employment concerns	Bullish
Coupang	New Purchase	South Korean e-commerce leader, vertically integrated logistics, stock fell due to cyberattack	Bullish
Haleon	New Purchase	Global consumer healthcare leader, management improvement post-spin-off, stock pressured by technical factors	Bullish
SAP	New Purchase	Global ERP leader, accelerating cloud migration, valuation depressed by AI narrative	Bullish
LSEG	New Purchase	Multi-asset trading infrastructure, monopoly assets, valuation at decade low	Bullish
Unicharm	New Purchase	Personal care, intensified competition in China/Southeast Asia, but profit share fell to ~20%	Bullish

Investment Implications

Contrarian positioning in software companies pressured by the AI narrative: Enterprise software companies like Dassault Systèmes, SAP, and LSEG have seen their valuations fall to historical lows due to AI competition concerns. However, the report argues that their business moats (physical simulation, ERP workflow definition, monopoly trading infrastructure) are difficult for AI to replace, making this a buying opportunity.
Focus on event-driven mispricing: Coupang's sharp decline due to a cyberattack and Haleon's undervaluation due to technical pressures are short-term negative events that create opportunities to buy high-quality companies at reasonable prices.
Regional and sector preferences: The fund is heavily weighted in Europe (ex-UK) and the Industrials/Materials sectors, maintaining an allocation to Emerging Markets (10.4%). However, investors should note that core European markets like France and Germany were detractors this quarter.