自奥克马克国际基金（Oakmark International Fund）于1992年成立以来，希罗一直负责管理其80亿美元的资金，过去十年的年回报率为9%，高于98%的同业竞争对手。他的战绩最近进一步提升：奥克马克国际基金最近被晨星（Morningstar）评选为所属类别中近一年、三年以及五年以来的最佳基金。去年，晨星还提名希罗为“十年最佳国际股票基金经理”。
如果你看一下在这次短暂主权债务风暴中遭受重创的一些金融机构，例如西班牙国家银行（Banco Santander）和法国巴黎银行（BNP Paribas），就能发现它们实际上并没有主权债务的问题。即便是瑞士私人银行瑞信（Credit Suisse）和瑞银（UBS），也看起来更像是资产管理公司。它们的净资金流入保持正向，现在这些具有良好盈利流的公司正以7、8倍的市盈率进行交易。法国巴黎银行和西班牙国家银行就是“与垃圾一起被扔掉的宝石”。
自那以后，日本公司的市净率由4至5倍下降至1倍以下，而股本收益率开始攀升。它们的市净率按理不应降至这一水平，但你开始发现股本收益率达到15%至20%的某些公司，例如佳能。我们认为，低价并不意味着被低估。你必须寻觅满足以下条件的公司：(a) 它正以低价被抛售，但是(b) 它致力于创造价值，以超额现金开展某些活动，构建每股账面价值，并且取得良好的股本回报率。当我们首次（至少是自二十世纪80年代中旬以来首次）能够寻获这样的公司时，我开始进行投资。
How much of a contrarian is David Herro? These days the fund manager is eschewing scorching emerging markets in favor of the seemingly toxic (European banks) or moribund (Japanese companies). Herro's record suggests a method to his madness.
He has managed the $8 billion Oakmark International Fund (OAKIX) since its founding in 1992, returning 9% annually over the past 10 years to trounce 98% of competitors. Herro's recent record is even stronger: Oakmark ranks No. 1 in its Morningstar category over the past one-, three-, and five-year periods. Last year Morningstar named Herro its International Stock Manager of the Decade.
Not bad for someone who had planned to be an academic. Herro left the University of Wisconsin-Madison's economics doctorate program at 25 years old -- "I thought, 'This publish or perish is too much'" -- to get his start managing institutional money. He figured he'd return to school at some point, but he's never been back.
Herro's trademark is avoiding what others love and going where others won't. When stock markets were prosperous in 2007, Herro warned his shareholders how ridiculous it would be to think he could keep posting enormous gains. Now he's telling investors not to expect another lost decade.
We asked the Chicago-based, 50-year-old value investor where he sees risk and potential in a tumultuous world.
Q. Let's start with the news. Commodity inflation is contributing to unrest in countries like Egypt and elsewhere. How do you deal with it?
A.Commodity prices, political instability, monetary problems are certainly out there --they always have been out there, and in fact, they always will be out there. That's the negative. The positive is that global GDP is growing at roughly 4.5% to 5% a year. That's not a bad place for companies to exist in. We think most of these macro phenomena are cyclical or short term in nature and not structural. So actually I like it. The more instability and volatility, the better. It provides for more long-term investment opportunity.
Is that why two-thirds of your holdings are in Europe, which is still recovering from the debt crisis?
When you look at some of the financials that got hit really hard in this little sovereign-debt tornado -- companies like Banco Santander (STD) and BNP Paribas -- they don't actually have sovereign-debt problems. Even the Swiss private banks -- Credit Suisse (CS) and UBS (UBS) -- are more asset-management companies. Net inflows stayed positive, and now we have companies that are trading at seven, eight times earnings with good earnings streams. BNP and Santander are the babies that got thrown out with the bath water.
Santander is a Spanish bank and earns 70% of its operating income from outside Spain. More than half comes from the emerging world. Yet the market sees "big Spanish bank." They think, "Fragile financial sector: Sell." We can take advantage of this short-term impatience. They are quality institutions: relatively well-capitalized, low loan losses, low cost/income ratios. They're good at what they do and were able to exploit it.
Within the financials, Bank of Ireland has been one of your biggest losers. It looks like the economy is still an atrocious story over there. What is the bullish case?
If you look in the rearview mirror, it's an atrocious story. If you are looking forward, there's only one bank that won't be controlled by the government. We don't think Ireland is going to go away, and the Bank of Ireland is the surviving bank. Now we made a big error. We owned it, it went up. We should have sold it. We didn't. But then we did buy it when it was down, and we sold a bunch of it before it fell too much. The stock has been so variable, it's enabled us to actually make a little money in the downturn.
Four of your top five holdings, including Toyota (TM) and Canon (CAJ), are in Japan. Why are you buying?
I'll tell you a funny story. When I worked at the State of Wisconsin Investment Board in the '80s, Japan was 60% of the international index, and I had 0% invested in Japan. They used to say, "This is very risky." And I said, "What's risky is investing in Japanese companies that are trading at 60 or 70 times earnings." The average return on equity was 5%. To me there was just no value.
Since then the price-to-book ratio has gone from four or five to below one, and return on equity is starting to creep up. It's not where it should be, but you're starting to see certain companies, like Canon, for instance, whose return on equity is 15% to 20%. Low price does not mean undervalued in our view. You have to look for companies that (a) are selling cheap but (b) are committed to value creation, to doing something with their excess cash, to building book value per share, and to getting a good return on equity. And we're able to find that for the first time ever -- at least since the mid-1980s, when I started investing.
You don't hold any Chinese stocks, and the only emerging stocks you have are in South Korea and Mexico. What's going on?
What's going on is that price is very important to us. In the late '90s we had 20% to 30% emerging-markets exposure, and people thought we were crazy. There had just been a crash, and prices were dirt cheap. Today there's hype and over-euphoria, and we cut our investments because they're reflected in the price. One has to distinguish between attractive equities and an attractive macroeconomic situation. And investors have confused this. We're at our lowest level in emerging markets probably since forever.
Everyone says, "China, China, China!" I love the fact that China is growing 8% to 10% a year. Do you play that by buying some state-owned enterprise that doesn't care about the shareholders, has no transparency, and is trading at 25 times earnings? Or do you play that by buying into a business that trades at less than 10 times cash flow and makes more than 30% of its profits from emerging markets and China? That's the case for companies like Danone, Diageo (DEO), and Nestlé. They have very good exposure to emerging markets, and that should give them decent growth.
There are big imbalances in the world. The U.S. is still under a big load of debt. China's currency is undervalued by nearly every measure. Inflation is a concern in the emerging world. What is the most dangerous thing going forward?
This has been minimized a little bit because it didn't really happen last crisis, and that's global protectionism. Preventing the free flow of goods and services and capital across international boundaries. That is a danger because in order for markets to work, you need arbitrage to work. You need traders and investors and whoever to exploit imbalances.
Secondly, the U.S. is still the largest economy in the world. My fear is that if we don't come to grips with our entitlement problem and our spending problem, people are going to dread Treasury auctions and we're going to get into a nasty cycle that is going to hurt the U.S. economy, and therefore, the global economy. Long-term interest rates would shoot up, which would kill housing even more. It would kill the bond markets. It would cause a lot of fear and fright, which would hurt expectations, which would hurt confidence. I do believe we're going to figure this out, but if we don't, there's going to be hell to pay.
Where's the worst place to be now?
Energy, natural resources. People still see growth in demand in emerging markets, and they think that translates to global growth in demand when in fact it doesn't. The developed world is actually declining in demand in some of these things. Look at the demand for oil, for instance -- it's right around 85, 86 million barrels a day. It basically has not grown more than 1% or 2% a year, if that, over the past decade. And when you look at what's happening in terms of energy efficiency and people wanting energy security, and then people believing in this green technology, it suggests oil demand isn't going to grow a lot in the near future.