Morningstar Magazine - June/July 2017 - 112

Ten Questions

Oakmark's David Herro looks at the past
decade and what lies ahead.

In the Spring 2007 issue of the magazine, Herro
answered our inaugural Ten Questions. A decade
later, we asked Herro to answer 10 more.
Laura Lallos, managing editor of Morningstar
magazine, interviewed him in March.

5. How do you handle the scrutiny that comes

with being such a large shareholder in controversial
names such as Credit Suisse CSGN: CH?

You stay focused on doing what is best for
your clients, which means pushing managements
to stay focused on long-term value creation.

1. How has investing in foreign stocks changed since

you were first named a Morningstar Fund Manager
of the Year a decade ago?

The biggest change has been the advance
of information technology where you now know
literally instantaneously what is happening
in the world. This can be good and bad-good
in that it is nice to have easy access to global
information at low or no cost, bad because it may
lead to knee-jerk decision-making.
2. It's been a decade of unpredictable global events.
What surprised you the most?

David Herro is chief investment officer,
international equity, at Harris Associates,
investment advisor to the Oakmark
funds. Morningstar named him InternationalStock Fund Manager of the Year for 2006 and
again for 2016, and also InternationalStock Fund Manager of the Decade for
2000-09. Herro is a portfolio manager on four
Oakmark funds that are Morningstar
Medalists, including International OAKIX and
International Small Cap OAKEX.

That people are surprised at global events!
Seriously, I have been investing professionally
since 1986, and geopolitical shocks and
events flow through time. The severity is different,
but shocks are the nature of the game. This
is actually a very good thing for true investors as
it allows you to invest in quality companies
at low prices.

Morningstar June/July 2017

7. Ten years ago, you told us you hadn't been to Africa

but wanted to visit. Have you-and have you invested
in any African companies?

I still have yet to see any countries in Africa.
The big key issue in many of these places
is liquidity and rule of law. Hopefully, someday,
based on those factors, there become
investment opportunities.
8. Which countries have the best cuisine?

Italy, without a doubt. Dark horse? Australia!

3. What is the biggest risk for global economies today?

9. Ten years ago, you told us you were reading
"every car magazine I can get my hands on." Do you
prefer foreign or domestic?

This is a persistent risk: that political forces will
work to prevent free market capitalism, whether it
is through the restriction of the global movement
of goods, services, and capital, or through ruthless,
thoughtless regulation and taxation.

I'm a globalized guy-and in the car world
today, an American car has foreign content and
vice versa. My very first auto was a VW
Rabbit, and I still have a soft spot for VWs despite
the company's lousy corporate governance.

4. What gives you the confidence to build a position

10. Driverless cars: for or against?

in a stock when others are fleeing?

For, when the time is right, which means not only
when technology is there, but the legal
issues are completely sorted out as well. However,
as "a car guy" I will always be driving and
controlling the auto; even today, I never use
cruise control.

We look for quality of business to assure
us strong managements, balance sheets, and
business models. These characteristics
should manifest themselves in durable cash-flow
streams, which is what defines value.

112

6. Where are the best opportunities today?

When I answer this question, it is based
on where we find the best value. We
are significantly overweight European financials,
meaning this is an area that to us represents
a strong value opportunity.



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