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Davis International Fund 2024 Semi-Annual Review

Writer's picture: Chris DonaldChris Donald

Strong Performance Metrics

The Davis International Fund posted an outstanding return of 8.66% for the first six months of 2024, surpassing the MSCI ACWI ex US index by 297 basis points. This achievement marks a significant outperformance, setting the tone for an exciting year ahead.


Key Contributors to the Fund’s Success

Several key holdings played a crucial role in the fund’s impressive performance, particularly in the realm of consumer-facing internet stocks.


- Meituan (MPNGF): With a staggering 36% increase, Meituan stood out as the largest contributor to the fund’s outperformance. The Chinese food delivery giant saw a strong rebound from COVID-related disruptions last year, boosting investor confidence and stock prices.


- Noah Holdings (NOAH): Despite its weak operating results, Noah Holdings maintains an attractive investment profile due to its net cash position, which equals 130% of its market capitalization. This strategic advantage positions Noah as an attractive buy despite short-term challenges.


Global Market Analysis: Navigating Challenges Ahead

The global economy and markets are traversing a complex landscape. With unemployment at a historically low 3.9% and projected GDP growth of 2.5% in 2024, the U.S. economy continues to show strength.


- S&P 500 Index Performance: The S&P 500 Index has seen remarkable growth, with a return of 26.3% in 2023 and an additional 15.3% in the first half of 2024. This robust performance is all the more impressive given the significant increase in interest rates over the past two-plus years.


Preparing for More Challenging Times

As we navigate the next phase of economic growth, it’s crucial to prepare for potential headwinds. The rapidly rising interest rates have been a defining feature of recent market dynamics, influencing both economic and financial outcomes.


- Dividend Hike and Share Buyback Activity: Many Chinese companies are rushing to hike dividends and buy back shares in a Japan-style reform effort. This move could boost investor confidence and drive performance, reflecting a broader trend in the market.


Investment Strategy Insights

The Davis International Fund’s performance can be attributed to a well-crafted investment strategy that focuses on long-term growth potential.


- Long-Term Growth Approach: By investing in companies with inherent value and growth potential, the fund benefits from the appreciation of these underlying assets over time. This approach has historically been advantageous, especially when unforeseen events like COVID-19 necessitate bold shifts in strategy.


Dividend Distributions

Investors in the Davis International Fund will receive a substantial dividend distribution amounting to $140 million, equivalent to 20% of the fund's market capitalization. This generous payout reflects the fund's ability to generate substantial cash flows from its profitable holdings.


Financial Performance Overview

The fund’s financial performance is buttressed by its steady operating expense ratio, which remains competitive at 1.09%. The adviser is contractually committed to waive fees or reimburse expenses to maintain an expense cap that expires on March 1, 2025.


Performance Data

Here are the key performance metrics for the Davis International Fund as of June 30, 2024:


Annual Total Returns:

  - 1-Year Return: 4.03%

  - 5-Year Return (including a maximum 4.75% sales charge): 0.12%

  - 10-Year Return: 1.35%


Navigating Global Markets with Confidence

Given the strong economic indicators and market performance, investors can approach global markets with renewed confidence.


Market Indicators: Strong economic growth and low unemployment rates are indicative of a robust market environment. However, rising interest rates pose potential challenges that necessitate careful portfolio management strategies.


GDP Growth Projections

The U.S. economy is projected to grow at a rate of 2.5% in 2024, driven by consumer spending and robust corporate earnings. This sustained growth is expected to continue through the year despite the ongoing pandemic and global economic uncertainties.


FAQs


1. What is the return on the Davis International Fund for the first six months of 2024?

The fund returned 8.66% for the first six months of 2024, outperforming the MSCI ACWI ex US index by 297 basis points.

2. Which specific holdings contributed significantly to this return?

Meituan (MPNGF) and Noah Holdings (NOAH) were significant contributors, with Meituan experiencing a substantial rebound from previous COVID-related disruptions and Noah maintaining a strong cash position despite weak operating results.

3. How does the fund manage its operating expenses?

The adviser is committed to waiving fees or reimbursing expenses to maintain an expense cap, which is set to expire on March 1, 2025.

4. What is the dividend distribution for investors in the fund?

Investors will receive $140 million in dividends, equivalent to 20% of the fund’s market capitalization.

5. What are the projected GDP growth rates for 2024?

The U.S. economy is projected to grow at a rate of 2.5% in 2024, driven by consumer spending and robust corporate earnings.


Data Points:


  • The fund’s 1-year total return for the period ending June 30, 2024, including a maximum sales charge of 4.75%, is 4.03%.

  • The fund’s 5-year total return (including a maximum sales charge of 4.75%) for the period ending June 30, 2024, is 0.12%.

  • The fund’s 10-year total return for the period ending June 30, 2024, is 1.35%.

  • The total annual operating expense ratio for Class A shares as of the most recent prospectus was 1.09%.

  • Investors in Davis International Fund will receive $140 million in dividends, equivalent to 20% of the market capitalization.

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