Dan Culloton: Morningstar added Davis International to its Morningstar Prospects list in December 2018 for its unique low-turnover, high-conviction process and its promising manager. This fund is essentially the non-U.S. picks from Davis Global, which already receives a Morningstar Analyst Rating of Bronze. Danton Goei manages both funds, and he's been a member of the Davis Advisers team since 1998, so he has more than 20 years of experience there as an analyst and a manager. He essentially uses the same process that many other Davis funds use here, which is to look for stocks that are trading at attractive discounts to their owner earnings, but Danton really steers his own course at this fund. It's a very focused portfolio of 30 to 40 stocks that keeps 50% or more of its assets in its top 10 holdings and has been known to keep up to 58% of its assets in emerging markets, including 40% in China.
And many of those holdings are also Internet companies such as Alibaba or JD.com, and it also has been known to take positions in private companies such as Didi Chuxing and Grab.com. You expect a portfolio like this to be volatile, and it has been, as exemplified by its steep losses in 2018 when many of its Internet names stumbled, but the fund's also capable of posting explosive gains, such as its more than 22% gain through April of 2019. Over the time, though, this fund has been competitive with its benchmark and with its peers, and we think its unique high-conviction, high active share approach is definitely worth watching for the long term.
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Dan Culloton does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.