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Contenders for International-Stock Manager of the Year

Several past winners are serious candidates at this point.

William Samuel Rocco, 08/07/2006

Now that 2006 is more than half over, we thought we'd highlight the early leaders for the three Morningstar Manager of the Year awards. We give out these awards each January to managers who earned superior returns the prior calendar year, who have delivered excellent long-term results, and who work for firms that treat fund investors well. We'll focus on the early candidates for International-Stock Manager of the Year in this column, and we'll concentrate on the early favorites for the Domestic-Stock and Fixed-Income Manager of the Year in upcoming articles.

We've identified two groups of early contenders for International-Stock Manager of the Year. The members of the first group are right on track to win, because they're first-rate managers and their funds currently pass all the screens that are necessary to be considered (top-quartile year-to-date returns, top-quartile five-year gains, and Stewardship Grades of B or better). There are six managers--and four former winners of the award--in this group: The team at  Dodge & Cox International StockDODFX(which won in 2004); Charles de Vaulx of First Eagle Overseas SGOVX(who won in 2001 along with his former comanager, Jean-Marie Eveillard); Hakan Castegren of Harbor International HAINX (who won in 1986); David Herro of Oakmark International Small Cap OAKEX; Bill Fries of Thornburg International Value TGVAX (who won in 2003); and David Mannheim and Marcus Smith of USAA International USIFX.

The members of the second group have some ground to make up--because their fund's year-to-date results or Stewardship Grades aren't currently up to snuff--but they are talented managers with impressive long-term records and thus certainly shouldn't be dismissed. There are four managers--and one former winner--in this group of longer shots: Bill Bower of Fidelity Diversified International FDIVX; Amit Wadhwaney of Third Avenue International Value TAVIX; Rudolph-Riad Younes and Richard Pell of Julius Baer International Equity BJBIX (who won in 2002); and the team at AllianceBernstein International Value ABIAX. Here are details on the managers in both groups.

Six Front Runners for the International-Stock Manager of the Year

The Team at Dodge & Cox International Stock DODFX

This team has put its patient value discipline to good use in a variety of conditions since the fund opened five years ago. Indeed, after posting solid results during the global sell-off of the very early 2000s, the team delivered exceptional gains as foreign stocks surged from 2003 through 2005, and it has produced topnotch results in this year's topsy-turvy climate. The team's interest in mid-cap and emerging-markets names has played a role in this success, but its stock selection has been significantly more important. And the fact that Dodge & Cox is one of the most fundholder-friendly firms around strengthens the team's case.

Charles de Vaulx of First Eagle Overseas SGOVX

First Eagle is clearly committed to serving the interests of fundholders. De Vaulx has played a key role in this fund's investment choices since it opened in 1993--and he became a comanager in late 1999--so he deserves significant credit for its excellent long-term returns. And he has delivered good results since becoming its sole manager after Jean-Marie Eveillard retired at the end of 2004. The considerable long-term and short-term success of First Eagle Global SGENX--where he has contributed in various capacities since the late 1980s and now is sole manager--underscores his abilities.

Hakan Castegren of Harbor International HAINX

Harbor treats fundholders pretty well, but Castegren has more than good stewardship going for him. He is one of the most-seasoned international-stock managers around, with nearly 19 years of experience on this offering alone. He has produced superior results in all kinds of conditions with his blue-chip-oriented value strategy during his long tenure here, as the fund's impressive five-, 10-, and 15-year returns attest. And he hasn't lost a step in recent years. The fund crushed the typical foreign large-value offering in 2005 and is on pace to do so again this year, as Castegren has made lots of good picks in the energy, industrial-materials, and other sectors.

David Herro of Oakmark International Small Cap OAKEX

Herro focuses on companies that are trading at deep discounts to his estimates of their intrinsic values, goes wherever the best bargains are, and runs a pretty concentrated portfolio. This bold strategy has backfired at times, but there's no arguing with this fund's longer-term returns, which are impressive in both absolute and relative terms. And Herro has executed his hard-core value discipline deftly of late. This foreign small/mid-value fund has posted top-quintile returns in this year's choppy conditions, thanks to a mix of good picks. The fact that Herro has used the same approach to produce strong overall results at Oakmark International OAKIX and that Oakmark is fundholder-friendly adds to his appeal.

Bill Fries of Thornburg International Value TGVAX

Fries stands out from his foreign large-blend counterparts in two respects. First, he follows a distinctive and eclectic style: He pursues three different types of stocks, pays significant attention to emerging-markets opportunities, and runs a relatively compact portfolio of 50-60 names. Second, Fries, who got a couple of comanagers earlier this year, has earned strong results in all sorts of climates since the fund opened in mid-1998, so the longer- and shorter-term returns are excellent here. The success Fries has enjoyed at the domestic-equity fund he runs in a similar manner--Thornburg Value TVAFX--and the commitment Thornburg has demonstrated to fundholders bolster his credentials.

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