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Our Nominees for International-Stock Manager of the Year

The five 2010 nominees are a diverse lot.

William Samuel Rocco, 12/15/2010

2010 is drawing to a close, which means it's time for us to announce our three sets of finalists for Morningstar Managers of the Year. We named the nominees for domestic-stock manager of the year in this column yesterday, and we will list the contenders for fixed-income skipper of the year in this space tomorrow. Here, we will highlight the finalists for international-stock manager of the year.

International-stock managers have faced a challenging environment in 2010. Sure, many developed markets are on pace to post high-single-digit returns this year, and most emerging markets look set to earn low-double-digit gains. Such results may well seem rather staid after an awful 2008 (when nearly all of the world's exchanges suffered huge losses) and terrific 2009 (when the majority of markets around the globe posted enormous gains). But most developed and emerging markets have gyrated up and down this year, and there are notable outliers in most regions as well as major variations across the market-cap, sector, and style spectrums. The typical overseas small-growth fund has gained 18.8% for the year to date through Dec. 9, in fact, while the average foreign large-value fund has returned 5.4%.

But a good number of foreign-equity skippers have navigated 2010's rather demanding conditions quite well and delivered good returns. Many of those also have the various other qualities we demand from our fund Manager of the Year nominees, including long-term records of superior performance, commitments to sound and distinctive strategies, and other strengths. Therefore, the competition to be a finalist this year was fierce.

In the end, though, five contenders stood head and shoulders above the rest. They are a diverse quintet that includes past winners, former nominees that have yet to win, and first-time nominees. Here they are in alphabetical order.

William Browne, John Spears, Tom Shrager, Bob Wyckoff--Tweedy Browne Global Value TBGVX
This management team has evolved since it was named International-Stock Manager of the Year in 2000: Tom Shrager and Bob Wyckoff joined the team in 2005, while Chris Browne stepped down from the team in mid-2009 (and tragically died later that year). But the team has stuck with the value discipline that has been in place since this fund opened in 1993. That discipline, which focuses on stocks from across the market-cap spectrum that are cheaper than their private market values, is distinctive as well as sound. The team pays lots of attention to lesser-known names, is willing to load up on individual markets and sectors, and is really patient. It's also unusual that the team normally hedges most of its foreign-currency exposure back into the dollar.

The team has implemented its value discipline deftly in 2010. Thanks to a diverse mix of picks that have prospered, including lesser-owned names like the German media company Axel Springer SPR and the Finnish elevator- and escalator-maker Kone Oyj KNEBV, this fund is up 12% and leads 95% of its foreign large-value peers for the year to date through Dec. 9. The team has also executed its style skillfully in a variety of other climates in the 2000s, including the 2008 meltdown and the 2009 rebound, so this fund boasts first-rate three-, five-, 10-, and 15-year returns. That all of the team members have significant to sizable investments in this fund is another factor in their favor. (Please note that this fund is expected to make a small distribution later this year.)

David Herro--Oakmark International OAKIX, Oakmark International Small Cap OAKEX
David Herro's stock selection has been superb at his foreign large-value fund this year. His contrarian nature and commitment to stocks trading at big discounts to their intrinsic values have made it difficult for him to find opportunities among emerging-markets and small-cap names of late, which have continued to thrive in 2010. But a plethora of his large-cap and mid-cap European picks have flourished, including the French advertising leader Publicis PUB and the Swedish lock-maker Assa Abloy. Thus, this fund is up 14.6% and second in its category for the year to date through Dec. 9.

Herro's results have been more mixed this year at Oakmark International Small Cap, which is in the middle of the foreign small/mid-value category for the year to date (albeit with a 17.2% gain). But Herro, who won this award in 2006, has regularly delivered the goods in the past at his small-cap charge as well as at his large-cap offering, so both funds boast impressive long-term records. (Oakmark International's 10.4% annualized 15-year return ranks first among foreign large-value funds and fourth best among all foreign large-cap offerings).

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