Better Know a Stock Picker

Welcome, Fools, to part 20 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

Oakmark International (OAKIX)

Expense ratio

1.09%

Fund size

$7.3 billion in assets

1-year return

22.14%

5-year return

19.12%

10-year return

11.99%

Source: Harris Associates

Top 10 holdings

Company

% of Assets

GlaxoSmithKline (NYSE: GSK  )

3.58%

DaimlerChrysler AG (NYSE: DCX  )

3.57%

British Sky Broadcasting

3.55%

NTT DoCoMo (NYSE: DCM  )

3.35%

BMW

3.15%

Signet Group (NYSE: SIG  )

3.01%

Diageo plc (NYSE: DEO  )

2.96%

AdeccoSA

2.81%

SK Telecom Co. (NYSE: SKM  )

2.63%

Bank of Ireland (NYSE: IRE  )

2.58%

Source: Harris Associates

Meet David Herro
The fightin' team at Oakmark International is led by David Herro, who may be the best investor at Chicago-based Harris Associates, which acts as the advisor for all of the Oakmark funds.

That may sound like heresy to you or any of the thousands of value-huggers out there who worship Bill Nygren. (Not of few of who reside in these digital confines, by the way.) Nygren is certainly deserving of praise, but Herro's record is just as superstantial. Since the fund's first days in September of 1992, Herro has piloted Oakmark International to a 13.2% average annual return; 4% better than the benchmark MSCI World index.

He's also led Oakmark International Small Cap since it opened to investors in November of 1995. In that time, the fund has returned 14.9% annually, outpacing the MSCI World index by roughly 7% a year. No wonder he is now Harris' Chief Investment Officer for International Equities. Stay the course, Mr. Herro.

Or don't. History suggests this investment manager, whose modest Midwestern roots include a master's degree in Economics from the University of Wisconsin-Milwaukee, isn't afraid to play rough when it comes to defending shareholder interests. For example, in 1995, he led a rebellion to oust Maurice Saatchi from the advertising firm he founded, Saatchi & Saatchi.

At the time, Herro told the Milwaukee Sentinel that he was repulsed the Saatchi's money-grubbing ways, which seemed to him an abuse of his fiduciary duty to shareholders. Since Oakmark International owned 9.5% of the outstanding shares, Herro felt forced to act: "We take responsibility to shareholders very seriously. My sole objective is to enhance the wealth of my shareholders...Now there is a management without an albatross around its neck. They are far better off without him."

A decade later, Oakmark International still owns shares of Publicis Groupe, which acquired Saatchi & Saatchi in September of 2000. And the stock has returned better than 17% annually over the last five years alone. Bravo, sir.

How he invests
Herro sticks it to Wall Street's stockinistas in much the same way that Nygren does. He's what the Harris team calls a "bottom-up value investor." So, unlike the investapo that bemoan short-term price swings, Herro stays focused on buying overseas firms that sell for a discount.

That discipline became especially important over the summer, when emerging markets in Asia and South America were beaten black-and-blue. How did Herro respond? With patience, of course. As he wrote in his most recent letter to shareholders of Oakmark International and International Small Cap:

"... As bottom-up value investors, we found plenty of opportunities in overseas markets. This highlights a very important lesson for all investors: investment success is generally driven by long term thinking, such as buying high quality businesses that are selling at discounted values and not trying to time markets or sectors."

Eat that, Wall Street.

Is this fund for you?
So, is Herro the next Peter Lynch? His track record is impressive enough that I'd invest with him. There's just one problem: Oakmark International is open only to existing investors and those who have accounts directly with Oakmark. And International Small Cap is closed to all new investors.

Bummer, right? Not so fast, Fool. Herro and Nygren have teamed to lead a brand new Oakmark fund, Global Select, which opened for business on Oct. 2. Color me thrilled. Though the initial expense ratio is too high for my tastes -- projected to be between 1.75% and 2% annually -- I expect it will fall dramatically as the asset base increases. I sense a future Champ in the making.

Still, if you'd rather not wait, the Motley Fool Champion Funds portfolio contains many excellent choices, including a leading member of the Oakmark family that's beaten its benchmark by more than 2% since the March issue, when it earned Championship status for the second time. (It is also one of many winners for advisor Shannon Zimmerman; try the service free for 30 days to learn more.)

And that's this week's profile. See you back here next week, fund nation. Good night.

Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 21% versus just 14% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to buy.

GlaxoSmithKline and Diageo are Income Investor selections. BMW is a Stock Advisor pick.

Fool contributorTim Beyersis a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Foolprofile. The Motley Fool'sdisclosure policyis always championship caliber.


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