David Herro is a seasoned guide to the global market with 40 years of investing experience and $15.3 billion in assets under management across the Oakmark Global Fund OAKGX and the Oakmark International Fund OAKIX.
He looks for value in non-U.S. stocks, but not just anywhere. Herro wants companies with superior quality, measured by metrics like return on equity and return on capital. “Value investing is the price you pay for what you get from an individual company,” he says.
## Avoid AI
Herro isn’t in AI or data-center stocks, despite the popular theme. “People say, ‘There is a boom in AI, let’s play the theme,’ without even looking at the prices they are paying,” he says. “That is the antithesis of how we invest. We are underweight AI and data-center stocks.” He recalls the early 2000s when investors piled into companies offering fiber-optic capacity, but the supply curve shifted faster than the demand curve, and many companies went bankrupt.
Instead of direct AI plays, Herro favors “bank shot” AI plays, which are names that have “picks and shovels” exposure to data-center expansion or tech stocks sold off due to misperceived AI risks. He singles out three companies: Ashtead Group (ASHGY), Capgemini (CGEMY), and Dassault Systemes (DASTY).
## Ignore Country Fundamentals
Herro says to think the opposite way when it comes to country fundamentals. Most large foreign companies get substantial revenue from outside of their home countries. “The growth rate of the company is important, not the growth rate of the home country,” he notes.
## Second Best is Good Enough
Herro’s fund portfolios own Adidas (ADDYY) due to its attractive valuation. “Adidas trades at 15.8-times forward earnings; Adidas at 15.8 is a screaming bargain,” he says. Management has successfully turned around the company, creating earnings growth. Adidas will get a boost soon from the 2026 FIFA World Cup.
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned AMZN, NVDA, MSFT, and AVGO. Brush has suggested AMZN, NVDA, MSFT, AVGO, and NKE in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks.
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