Embracing Value: The Strength of Dodge & Cox’s Global Stock Fund

In recent years, the allure of growth stocks, particularly those in the technology sector, has dominated investment conversations. These stocks have consistently captivated the attention of investors looking for rapid capital appreciation. However, as the financial landscape evolves, there’s a growing recognition of the importance of diversification and value-oriented strategies in investment portfolios. A prime example is the Dodge & Cox Worldwide Funds plc – Global Stock Fund, which exemplifies a sound value-based approach to investing. This fund has garnered the distinction of being included in Fidelity’s Select 50 list, highlighting its appeal and robust strategy.

A Legacy of Value-Based Investing

Founded in 1930, Dodge & Cox stands as one of the largest independently owned investment firms globally. This firm has differentiated itself from many of its peers by adhering strictly to a value-oriented investment philosophy. The fundamental principle of this strategy is focused on identifying companies that are undervalued relative to their intrinsic worth, a process they apply across a narrow spectrum of investment strategies. This disciplined approach has fostered a reputation for maintaining resilience during various market cycles.

Investment Objective and Strategy

The Dodge & Cox Global Stock Fund aims to provide investors with exposure to a diversified portfolio of medium-to-large, well-established companies. This fund seeks out companies that appear temporarily undervalued but hold positive long-term growth prospects. By investing in both developed and emerging markets, the fund outlines its strategy through careful stock selection, considering factors such as:

• Financial strength
• Economic conditions
• Competitive advantages
• Quality and sustainability
• Environmental, Social, and Governance (ESG) credentials
• Competence of management

Evaluating these elements allows the managers to ascertain which companies offer the best value while still having strong growth trajectories.

Portfolio Composition

As of September 30, 2024, the fund’s portfolio comprised 91 stocks sourced from 19 different countries, underscoring its impressive diversification. Notably, the ten largest positions make up just 23.8% of total assets, indicating a balanced approach that minimizes reliance on any single investment. In terms of market capitalization, the weighted average of the fund’s holdings stands at $234 billion, significantly lower than the $585 billion benchmark. This discrepancy aligns with its value-oriented strategy, as the fund typically invests in companies with more appealing price-to-earnings ratios compared to the broader index.

Top 10 Holdings

The fund’s top positions include well-known corporations that reflect its strategic focus:

1. Alphabet
2. Sanofi
3. GSK
4. Charles Schwab
5. Johnson Controls International
6. Charter Communications
7. Alibaba Group
8. RTX Corporation
9. Fiserv
10. Comcast

Geographic and Sector Allocation

From a geographic perspective, the fund’s largest allocation is towards the United States at 46.5%, significantly lower than the MSCI ACWI benchmark of 64.5%. This allocation strategy emphasizes a preference for the UK, Europe, and Emerging Markets, which are all overweight compared to the benchmark. Sector-wise, the fund emphasizes Financials and Health Care, while there is a notable underweighting in Technology, reflecting its disciplined value criteria.

Market Outlook and Manager Insights

In their latest update from June 2024, Dodge & Cox management highlighted the widening valuation gaps between US and non-US stocks, as well as between growth and value stocks. This scenario presents unique opportunities for value-oriented investors like themselves. They expressed optimism about the fund’s portfolio, pointing out it trades at 11.8 times forward earnings versus 17.7 times for the MSCI ACWI, illustrating the inherent value within the fund’s strategy.

Performance Review

Over the past decade, the GBP accumulating share class of the fund has yielded an average annual total return of 10.4% net of fees, slightly trailing the benchmark’s 11.5%. This underperformance can largely be attributed to the dominance of growth stocks during the market’s prolonged bullish phases. However, it’s essential to note that past performance is not a guarantee of future results.

Cost Effectiveness

With an ongoing charges figure of 0.63%, the Dodge & Cox Global Stock Fund offers excellent value for an actively managed global fund. The experience and expertise of the management team lend credence to the fund’s ability to navigate the complexities of global markets effectively.

Suitability for Investors

This fund is ideally suited for long-term investors with a time horizon of ten years or more. Its value bias works particularly well in tandem with more growth-oriented investments, as this combination can create a balanced portfolio poised for growth through various market conditions.

Conclusion

In a climate of extreme market speculation predominantly favoring growth-oriented stocks, the Dodge & Cox Worldwide Funds plc – Global Stock Fund offers a refreshing, value-driven alternative. By focusing on well-researched investments grounded in fundamental analysis and diversification, it presents a compelling case for investors seeking stability and potential growth in an unpredictable market. Embracing such strategies can help investors navigate the considerable fluctuations of today’s financial environment while laying the groundwork for robust long-term returns.