Davis International ADR SMA Portfolio - Summer Update 2020 Commentary Holdings Fact Sheet Investment Professionals Contacts - Davis Advisors
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Davis International ADR SMA Portfolio Summer Update 2020 Commentary Holdings Fact Sheet Investment Professionals Contacts The Equity Specialists
Portfolio Commentary
Market Perspectives recover, and some of those businesses may not recover
fully for a long time as they engage in “nice-to-have”
In the first half of 2020, the MSCI ACWI (All Country
products and services versus non-discretionary, “must-
World Index) ex US returned −11.00%. In the period,
have” categories.
Davis International ADR SMA Portfolio outperformed
the benchmark by a wide margin.1
Finally, diversifying one’s portfolio with a varied set of
businesses and across multiple geographies can be
We are neither optimists nor are we pessimists. Rather,
beneficial in our experience both to capture a broad
it is a time to be realistic, both about the near-term
range of opportunities and to avoid putting all of one’s
uncertainty and challenges economically that we face,
eggs in a single basket. •
but also taking into account how the future may improve
from here in iterative fashion.
There are a number of guideposts and parameters that Portfolio Positioning
can prove useful in navigating crisis periods while one Building an “all-weather” portfolio requires three key
is in them, precepts we have learned over our more elements. First and foremost, we want to invest in
than 50 years navigating the stock market through all companies with the balance sheet and cash generation
manners of conditions and crises: to weather the inevitable financial storms. Every reces
sion is a reminder of the dangers of leverage, and we
The first lesson is to focus intensely on each and every expect this one to be no different. Secondly, we want the
investment one holds and to be positioned in highly long-term trends in our favor. Companies where time is
durable, defensible businesses. Invaluable attributes their friend and that benefit from secular changes, such
in environments like the present include balance sheet as those due to technology, consumer preferences or
strength (with net cash preferably) and stable sources regulatory shifts, are in a position to grow their business
of funds and cash flow to support operations and and build value over time. Finally, a portfolio can stumble
necessary capital expenditures. if you pay too high of a price. The attractive valuation of
our portfolio is not only what enables us to earn above-
Second, it is important to revisit the long-term and average returns, but is also our margin of safety in case
perennial relevance of different businesses—and whole the future is bleaker than forecast.
industries—looking out some number of years. Some
may fit squarely in the paradigm of how consumers At Davis, we prioritize owning businesses that generate
and businesses interface (e.g., e-commerce, cloud strong levels of cash flow and that can reinvest this
computing, for-profit, after-school learning programs in cash at high rates of return. Inevitably, to do so requires
China, etc.). In other cases, businesses may prove more having a competitive advantage. Brands, lean cost
ephemeral and non-essential in leaner economic times structures with great efficiencies and, in the case of
where consumers have to make more choices. Casinos, financial services, a low-cost deposit funding base are
certain areas of travel, brick-and-mortar retail (already examples of advantages that can translate into both
under secular pressure from online competition) and higher earnings power and competitive market share
luxury goods, for example, could in theory take longer to gains over time.
This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is
no guarantee that these statements, opinions or forecasts will prove to be correct. Equity markets are volatile and an investor may lose money. Past performance is not
a guarantee of future results. 1. International Equity SMA Composite. Past performance is not a guarantee of future results. The outbreak of COVID-19 has negatively
affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may
exacerbate other risks that apply to the Fund.
2As a case in point, we hold a number of technology- Portfolio Review
and consumer-related businesses serving a wide
In the first six months of 2020, Davis International
range of industries in China from e-commerce to cloud
ADR SMA Portfolio outperformed the −11.00% return
computing, for-profit education, food delivery and
of the MSCI ACWI ex US benchmark by a wide margin.
classified advertising, among other areas. We believe
our companies in these industries have tremendous During the period, the COVID-19 pandemic and
competitive advantages that cannot easily be competed economic disruption significantly impacted businesses
away, possibly for years to come. It is imperative with around the globe, yet we were generally satisfied with
these types of businesses to adhere to a valuation the performance of our portfolio companies through
discipline and to establish why one should feel confident this difficult period. Among drivers of outperformance
those companies are likely to sustain their leading edge were many of our Chinese consumer-facing Internet,
in the face of formidable competitive forces. education and food delivery companies. Alibaba Group
Holding, a dominant force in China’s e-commerce and
At the other end of the spectrum, we own positions
cloud computing markets (among other industries),
in a number of staid, fairly mundane cash-generative
is an example of the caliber, scale advantages and
industries, such as financial services and certain types
sheer earnings power represented by such holdings
of industrials, many of which have a long history of
in the Portfolio. Online retail has been rapidly taking
returning capital to shareholders through dividends and
share globally. In 2019, the online share of China’s
share repurchases, while also reinvesting at attractive,
retail sales surpassed 20% (versus approximately
if not exceptional, returns on equity. Bank of N.T.
11–12% for the U.S., by comparison). Although the
Butterfield & Son, a Bermuda-based trust and lending
lockdowns and travel bans employed to combat the
institution serving the reinsurance, high-net-worth and
spread of COVID-19 hurt consumer demand, they also
community mortgage markets, is one such example.2
accelerated the secular trends favoring e-commerce,
Other financial holdings in the Portfolio include DBS
working remotely and online learning, which are
Holdings of Singapore, two major Nordic banks and a
businesses where a number of our top holdings are
Swiss-based private bank, among others. These tend
leaders. These consumer Internet leaders are the “blue
to be slower growth in nature, but extremely proven,
chips of tomorrow” with strong moats, good growth
durable, established and cash-generative.
prospects, cash-generative business models and
attractive valuations.
From a diversification standpoint, the Portfolio is diver
sified consciously across 21 differentiable businesses
Among detractors were international financials. While
in 11 countries and spans sectors from communication
these names detracted from first-half results, they
services and technology to consumer discretionary
represent very compelling value at these prices and
(including certain on-line businesses), financial services
offer the potential for much better returns over the
and industrials. •
2. Holdings discussed in this commentary are selected according to objective, non-performance-based criteria. They are chosen each quarter according to a consistent
methodology based on their weight in the Davis Advisors International SMA model portfolio as well as recent purchases and recent sales and are intended only as illustra-
tions of the Davis Investment Discipline. They are not recommendations to buy, sell or hold any security. Individual account holdings may vary.
3long term, in our view, than meets the eye today. The Nonetheless, the traumatic experience of COVID-19
market fears the impact of the looming recession on will result in better early warning systems and better
bank earnings. While loan losses will naturally rise in the coordination of national healthcare systems and a more
coming recession, the banks are entering this recession formalized protocol all countries can follow. These
with much higher capital ratios—often twice as high efforts, while not foolproof, will make the world better
—as the last one in 2008–09. Strong balance sheets, prepared for future pandemics.
conservative lending decisions in the years following
the financial crisis and low valuations are why we see The businesses in Davis International ADR SMA
the banks as another area of opportunity. These banks Portfolio have by and large performed very well during
have proven their durability by weathering numerous the first half of 2020, and in some ways just went
recessions, wars and some even past global pandemics. through their own stress test of how they perform during
Meanwhile, a number of our international financial a serious economic downturn while consumer demand
holdings are trading at a significant discount even to is in freefall. Many of our top holdings such as Alibaba
adjusted book value. Group Holding produced outstanding results in a difficult
environment. Banks in the portfolio are better prepared
Among recent changes to the Portfolio, we have added than ever for the current recession. Fear of a repeat of
to select international financials first and foremost, the financial crisis is so high that financials are by many
funding some of our purchases with the sale of Seven metrics cheaper than they have ever been relative to
Generations Energy among other holdings. • the overall stock market—cheaper even than during the
financial crisis. Both the “blue chips of tomorrow” in
strong competitive positions that benefit from secular
Conclusion tailwinds and historically cheap financials, with very
The year 2020 will unfortunately always be remembered high capital ratios and conservative loan policies,
as the year the world experienced its worst pandemic are attractive, and they are why we are so optimistic
in over a century. It will likely also be remembered, looking ahead.
however, as the beginning of the period the world
We understand that in uncertain times such as
became much safer from future pandemics. Before
these it is more important than ever to be able to
9/11, airports had security screening, but it took a major
entrust your savings to an experienced and reliable
attack for the Transportation Security Administration
investment manager with a strong long-term record.
(TSA) to be created in November 2001. Similarly, the
U.S. banking system has long been regulated, but it took Over the 50 years since the firm’s founding, the Davis
discipline has demonstrated an ability to generate
the financial crisis to pass the Dodd-Frank Act in 2010,
above-average returns, based on in-depth fundamental
raising banks capital ratios and establishing an annual
analysis, a long-term investment horizon and a strong
stress test for large banks conducted by the Federal
value discipline. While the times have changed, these
Reserve. Following these events, flying has become
much safer, and the U.S. banking system more resilient fundamental principles are timeless and proven.
to shocks. In some ways, we might have been lucky
Thank you for your confidence, and we wish all of our
that COVID-19, while very infectious, is not as lethal as
shareholders and their families well in this time. •
other epidemics, such as the 1918 influenza pandemic.
4Davis International ADR SMA Portfolio
Selective. Attractive Growth. Undervalued.
Today, Davis International ADR SMA Portfolio a portfolio of those few companies that have above-
holdings can be characterized by three characteristics: average growth and below-average valuations. This
selective, attractive growth potential and undervalued. combination of higher growth at below average
Selectivity allows us to reject the vast majority of valuations should create wealth for our shareholders
companies that make up the index and instead build in the years and decades to come.
Davis International
MSCI ACWI ex US
ADR SMA Portfolio
Selective Holdings 21 2,372
Attractive Growth EPS Growth (5 Year)1 31.3% 12.3%
Undervalued P/E (Forward)2 8.1x 15.9x
The Attractive Growth and Undervalued reference in this piece relates to underlying characteristics of the portfolio holdings. There is no guarantee that the
Portfolio’s performance will be positive as equity markets are volatile and an investor may lose money. Past performance is not a guarantee of future returns.
Performance may vary. 1. Five-Year EPS Growth Rate is the average annualized earning per share growth for a company over the past five years. The values for the
portfolio and index are the weighted average of the five-year EPS Growth Rates of the stocks in the portfolio or index. 2. Forward Price/Earnings (Forward P/E) Ratio is
a stock’s current price divided by the company’s forecasted earnings for the following 12 months. The values for the portfolio and index are the weighted average of
the P/E ratios of the stocks in the portfolio or index.
5Davis International ADR SMA Portfolio Holdings June 30, 2020
High Conviction. Different from the Index.
Holding Portfolio (%) MSCI ACWI ex US (%)
Alibaba Group Holding 7.0% 2.0%
DNB 7.0 0.1
JD.com 7.0 0.3
Naspers 7.0 0.4
New Oriental Education & Technology 7.0 0.1
Schneider Electric 7.0 0.3
DBS Group Holdings 6.7 0.1
AIA Group 6.3 0.6
58.com 6.0 0.0
Danske Bank 5.8 0.1
Julius Baer Group 5.3 0.1
Ferguson 5.1 0.1
Prosus 4.2 0.2
Hollysys Automation Technology 4.1 —
IQIYI 2.6 0.0
Bank of N.T. Butterfield & Son 2.5 —
China Index Holdings 1.3 —
Trip.com Group 1.3 0.1
Noah Holdings 1.2 0.0
Baidu 1.1 0.2
Yiren Digital 0.5 —
CASH 4.0 —
100.0%
The above listed securities are representative of a model Davis International ADR SMA Portfolio as of the indicated date. Portfolio holdings may change over time.
Individual accounts may contain different securities. There is no assurance that any securities listed herein will remain in an individual account at the time you
receive this report. The securities listed for the MSCI ACWI ex US are not representative of the entire portfolio, which consists of 2,372 securities. The information
provided should not be considered a recommendation to buy or sell any particular security. There can be no assurance that an investor will earn a profit and not
lose money.
6Davis International ADR SMA Portfolio June 30, 2020
Davis International ADR SMA is a • Undervalued. Attractive Growth. Selective.1 Portfolio Index
portfolio of attractive businesses Undervalued P/E (Forward) 8.1x 15.9x
Attractive Growth EPS Growth (5 Year) 31.3% 12.3%
from outside of the U.S. selected Selective Holdings 21 2,372
using the time-tested Davis Total Countries 11 48
Investment Discipline. As one of
the largest investors in the strategy, • Experienced Management •A
ttractive International Businesses
we have a unique commitment to Danton Goei, 22 years with Davis Advisors (Top 10 Holdings)
client stewardship. Alibaba Group Holding (China): World’s largest
and most valuable retailer, with operations in
• Geographically Diverse Portfolio
over 200 countries, and dominant position in
•U nique Attributes of Davis Asia 54.3%
the e-commerce market
International ADR SMA Portfolio Europe 35.8
Africa 7.3 DNB (Norway): Largest financial institution
• Equity-Focused Research Firm:
North & Central America 2.6 and oldest private bank in Norway—digital
Established in 1969, Davis is a leading leadership and economies of scale are leading
specialist in equity investing. Our • Top 10 Countries drivers of strong and durable moat
primary focus on research and unique China Hong Kong JD.com (China): One of the largest e-commerce
investment discipline has built wealth France Denmark businesses in mainland China offering consumer
South Africa Switzerland electronics and appliances
for our clients over the long term. Norway U.K.
Singapore Netherlands Naspers (South Africa): Media conglomerate
• ortfolio of Best of Breed Businesses:
P that holds interests in a range of e-commerce
Utilizing rigorous independent businesses around the world, including Tencent
research, we invest in durable, well- • Sectors Portfolio Index
Financials 36.7% 18.0% New Oriental Education & Technology (China):
managed businesses with sustainable Consumer Discretionary 34.9 12.6 Largest provider of private education services
competitive advantages and attractive Industrials 14.0 11.4
Schneider Electric (France): Global specialist in
long-term growth prospects selling Communication Services 10.1 7.6
energy management
at a discount to their true value. Information Technology 4.3 11.0
Health Care 0.0 10.7 DBS Group Holdings (Singapore): Largest bank
• F lexible, Opportunistic Approach: Consumer Staples 0.0 10.0 in Singapore and among the largest in developed
Materials 0.0 7.6 Asia—has a strong moat enabled by relatively
The Portfolio invests in both
Energy 0.0 4.8 inexpensive cost of funds, technology leadership,
developed and developing markets. Utilities 0.0 3.5 and high market share of retail deposits
We believe a bottom-up stock Real Estate 0.0 2.8
AIA Group (Hong Kong): Second largest and
selection process and not mirroring
fast growing life insurer in China with customers
the benchmark index are keys to throughout Asia-Pacific and a competitive
long-term outperformance. Active advantage of a strong brand
Share 95%. 58.com (China): Leading on-line classified ads
• e Are One of the Largest Investors:
W business in China
We have a unique commitment to Danske Bank (Denmark): Largest bank in
stewardship, generating attractive Denmark serving more than 5 million retail
customers
long-term results and managing risks.
Inception
• Performance 1 Year 3 Year 5 Year 10/1/14
International Equity SMA Composite (gross) 0.70% 3.56% 4.12% 4.53%
International Equity SMA Composite
(with a 3% max. wrap fee) −2.29 0.50 1.05 1.44
MSCI ACWI ex US −4.80 1.13 2.26 1.96
The performance presented represents past performance and is not a guarantee of future results. Total return assumes reinvestment of dividends. Investment
return and principal value will vary so that an investor may lose money. Current performance may be higher or lower. Total return updates are available quarterly.
Please ask your financial advisor to contact Davis Advisors. 1. The Attractive Growth and Undervalued reference in this piece relates to underlying characteristics
of the portfolio holdings. There is no guarantee that the portfolio performance will be positive as equity markets are volatile and an investor may lose money.
7Investment Professionals
Christopher C. Davis joined Davis Advisors in 1989. Pierce B.T. Crosbie, CFA joined Davis Advisors in
He has more than 30 years experience in investment 2008. Previously, he worked as a research analyst at
management and securities research. Mr. Davis received Davidson Kempner Capital Management and in mergers
his M.A. from the University of St. Andrews in Scotland. and acquisitions at RBC Capital Markets. Mr. Crosbie
received his B.A. from McGill University, his M.B.A. from
Danton G. Goei joined Davis Advisors in 1998. the Harvard Business School and is a CFA charter holder.
Mr. Goei received his B.A. from Georgetown University
and his M.B.A. from The Wharton School. He was Edward Yen joined Davis Advisors in 2013.
previously employed at Bain & Company, Morgan Previously, he worked at Dodge & Cox and
Stanley Asia Ltd. and Citicorp. Mr. Goei speaks multiple Lehman Brothers. Mr. Yen received his B.S. from
languages and has lived in Europe, Asia and currently the University of California, Berkeley and his M.B.A.
resides in New York City. from Stanford University.
Dwight C. Blazin joined Davis Advisors in 1995. Benjamin Betcher, CFA joined Davis Advisors in
He was previously a consultant for IT Consulting 2017. Previously, he worked as a research analyst at
and Systems Design. Mr. Blazin received his B.A. Sanford Bernstein and as head of finance at Ampush
from Brigham Young University and his M.A. and Media. Mr. Betcher received his B.S. from Tufts
Ph.D. from New York University. University and is a CFA charter holder.
Kent Y. Whitaker first joined Davis Advisors in Sobby Arora, CFA joined Davis Advisors in
2000. Previously, he worked at Amoco Corporation, 2017. Previously, he worked as a research analyst at
British Petroleum, Hunt Energy Corporation, and Federated Global Investment Management and ING
Asarco. Mr. Whitaker holds a B.A. from Dartmouth Investment Management. Mr. Arora received his B.A.
College, a M.S. from Miami University and a M.B.A. from Colgate University, his M.B.A. from The Stern
from the Amos Tuck Business School. School of Business and is a CFA charter holder.
Darin Prozes joined Davis Advisors in 2004.
He previously worked for the Parthenon Group, a
strategy consulting firm. Mr. Prozes received his
B.A. from Princeton University and his M.B.A. from
Stanford University.
8Contacts
1 3
2 8
Financial Advisor Support
7
and Literature Requests: 800-717-3477 9
davisfunds.com
6
Dodd Kittsley, National Director 5
212-891-5578, dkittsley@dsaco.com 4
Ed Snowden, Manager, Regional Representatives
800-717-3477 Ext. 2267, esnowden@dsaco.com
Contact Regional Directors or Regional Representatives to arrange meetings
or for information on our investment process, philosophy and performance.
1 West Coast Alaska, California, Hawaii, Oregon, Washington
Joe Emhof Regional Director 800-717-3477 Ext. 3786 jemhof@dsaco.com
Jon Franke Senior Regional Representative 800-717-3477 Ext. 2663 jfranke@dsaco.com
2 Central Arizona, Colorado, Idaho, Iowa, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, Wyoming
Dan Steichen Regional Director 800-717-3477 Ext. 2262 dsteichen@dsaco.com
Sean Lynch Senior Regional Representative 800-717-3477 Ext. 2675 slynch@dsaco.com
3 Great Lakes Illinois, Indiana, Kentucky, Minnesota, Southern Ohio, Wisconsin
Bill Coughlin Regional Director 800-717-3477 Ext. 3783 bcoughlin@dsaco.com
Nancy Brennan Senior Regional Representative 800-717-3477 Ext. 2679 nbrennan@dsaco.com
4 South Central Arkansas, Kansas, Louisiana, Missouri, Oklahoma, Tennessee, Texas
Mark Giles Regional Director 800-717-3477 Ext. 6908 mgiles@dsaco.com
Marty Smith Regional Representative 800-717-3477 Ext. 2674 martysmith@dsaco.com
5 Southeast Alabama, Florida, Georgia, Mississippi, Puerto Rico
Peter Yensel Regional Director 800-717-3477 Ext. 3785 pyensel@dsaco.com
Mike Longoni Senior Regional Representative 800-717-3477 Ext. 2261 mlongoni@dsaco.com
6 Mid-Atlantic Maryland, North Carolina, South Carolina, Virginia, Washington DC, West Virginia
J.P. Raflo Regional Director 800-717-3477 Ext. 6905 jraflo@dsaco.com
Mari Downey Senior Regional Representative 800-717-3477 Ext. 2665 mdowney@dsaco.com
7 North Atlantic Delaware, New Jersey, Northern Ohio, Pennsylvania
Reed Finley Regional Director 800-717-3477 Ext. 6906 rfinley@dsaco.com
Danny Hardy Regional Representative 800-717-3477 Ext. 2677 dhardy@dsaco.com
8 Northeast Maine, Massachusetts, Michigan, New Hampshire, Northern New York, Rhode Island, Vermont
Steve Coyle Regional Director 800-717-3477 Ext. 3790 coyle@dsaco.com
Danielle Irwin Senior Regional Representative 800-717-3477 Ext. 2682 dirwin@dsaco.com
9 New York City Connecticut, Southern New York
Jim Ambrosio Regional Director 800-717-3477 Ext. 3787 jambrosio@dsaco.com
Laurel Hardy Senior Regional Representative 800-717-3477 Ext. 2683 lhardy@dsaco.com
9This material may be shared with existing and potential of new information, future events, or otherwise. The information provided in this report does not
clients to provide information concerning market While we believe we have a reasonable basis for our provide information reasonably sufficient upon
conditions and the investment strategies and techniques appraisals and we have confidence in our opinions, which to base an investment decision and should
used by Davis Advisors to manage its client accounts. actual results may differ materially from those not be considered a recommendation to buy or sell
Please refer to Davis Advisors’ Form ADV Part 2 for more we anticipate. any particular security. There is no assurance that
information regarding investment strategies, risks, fees, any of the securities discussed herein will remain
Davis Advisors’ International Equity Composite
and expenses. Clients should also review other relevant in an account at the time this report is received or
includes all actual, fee-paying, discretionary
material, including a schedule of investments listing that securities sold have not been repurchased. The
International investing style institutional accounts,
securities held in their account. securities discussed do not represent an account’s
mutual funds and wrap accounts under management entire portfolio and in the aggregate may represent
The performance of mutual funds is included in for each investment period from 1/1/05, through only a small percentage of any account’s portfolio
the Composite. The performance of the mutual the date of this report, including those accounts holdings. It should not be assumed that any of
funds and other Davis managed accounts may no longer managed. Effective 1/1/98, a minimum the securities discussed were or will prove to be
be materially different. For example, the Davis account size of $3,500,000 was established. profitable, or that the investment recommendations
International Fund may be significantly larger Accounts below this minimum are deemed not to be or decisions we make in the future will be profitable
than another Davis managed account and may be representative of the Composite’s intended strategy or will equal the investment performance of the
managed with a view toward different client needs and as such are not included in the Composite. A securities discussed herein. It is possible that a
and considerations. The differences that may affect time-weighted internal rate of return formula is security was profitable over the previous five-year
investment performance include, but are not limited used to calculate performance for the accounts period of time but was not profitable over the last
to: the timing of cash deposits and withdrawals, the included in the Composite. For the net of advisory year. In order to determine if a certain security added
possibility that Davis Advisors may not buy or sell a fees performance results, custodian fees are treated value to a specific portfolio, it is important to take
given security on behalf of all clients pursuing similar as cash withdrawals and advisory fees are treated into consideration at what time that security was
strategies, the price and timing differences when as a reduction in market value. For mutual funds, the added to that specific portfolio. A complete listing
buying or selling securities, the size of the account, Composite uses the rate of return formula used by of all securities purchased or sold in an account,
the differences in expenses and other fees, and the the open-end mutual funds calculated in accordance including the date and execution prices, is available
clients pursuing similar investment strategies but with the SEC guidelines adjusted to treat mutual upon request.
imposing different investment restrictions. This is not fund expenses other than advisory fees as cash
a solicitation to invest in the Davis International Fund withdrawals; sales charges are not reflected. Wrap The investment objective of a Davis International
or any other fund. account returns are computed net of a 3% maximum Equity account is long-term growth of capital. There
wrap fee. For the gross performance results, cus can be no assurance that Davis will achieve its
Effective 9/23/14, Davis Advisors created an todian fees and advisory fees are treated as cash objective. Davis Advisors uses the Davis Investment
International Equity SMA Composite which excludes withdrawals. A list of Davis Advisors’ Composites Discipline to invest a client’s portfolio principally in
the institutional accounts and mutual funds. Perfor is available upon request. common stocks (including indirect holdings of com
mance shown from 10/1/14, through the date of this mon stock through depositary receipts) issued by
report, the Davis Advisors’ International Equity SMA This report discusses companies in conformance both United States and foreign companies, including
Composite includes all eligible wrap accounts with with Rule 206(4)-1 of the Investment Advisers countries with developed or emerging markets. The
no account minimum from inception date for the Act of 1940 and guidance published thereunder. global companies’ strategy may invest in large, me
first full month of account management and includes The companies we discuss are chosen in the dium, or small companies without regard to market
closed accounts through the last day of the month following manner: starting at the beginning of the capitalization. The principal risks are: common stock
prior to the account’s closing. year, the holdings from an International model risk, depositary receipts risk, emerging markets risk,
portfolio are listed in descending order based
A time-weighted internal rate of return formula fees and expenses risk, foreign country risk, foreign
on percentage owned. Companies that reflect
is used to calculate performance for the accounts currency risk, headline risk, large-capitalization
different weights are then selected. (For the first
included in the Composite. The net of fees rate of companies risk, manager risk, mid- and small-
quarter, holdings numbered 1, 11, 21, and 31 are
return formula is calculated based on a hypothetical capitalization companies risk, and stock market
selected and discussed. For the second quarter,
3% maximum wrap fee charged by the wrap account risk. See the ADV Part 2 for a description of these
holdings numbered 2, 12, 22, and 32 are selected
sponsor for all account services. For the gross principal risks.
and discussed. This pattern then repeats itself
performance results, custodian fees and advisory for the following quarters. Each of these holdings We gather our index data from a combination
fees are treated as cash withdrawals. must come from a different country.); one recent of reputable sources, including, but not limited
Davis Advisors is committed to communicating purchase and one recent sale are also discussed. to, Thomson Financial, Lipper, Wilshire, and
with our investment partners as candidly as possible A sale is defined as a position that is completely index websites.
because we believe our clients benefit from under eliminated from the portfolio before the end of the
The MSCI ACWI (All Country World Index) ex US is
standing our investment philosophy and approach. quarter in question. If there were no purchases or
a free float-adjusted market capitalization weighted
Our views and opinions include “forward-looking sales, the purchases and sales are omitted from
index that is designed to measure the equity
statements” which may or may not be accurate the report. If there were multiple purchases and/
market performance of developed and emerging
over the long term. Forward-looking statements or sales, the purchase and sale discussed shall be
markets, excluding the United States. The index
can be identified by words like “believe,” “expect,” the earliest to occur. If there are multiple purchases
includes reinvestment of dividends, net of foreign
“anticipate,” “feel,” or similar expressions. You and/or sales on the same day, the one that is the
withholding taxes. Investments cannot be made
should not place undue reliance on forward-looking largest percentage of assets will be discussed. If a
directly in an index.
statements, which are current as of the date of this holding to be discussed (excluding the buys/sells)
report. We disclaim any obligation to update or alter is no longer in the model portfolio as of quarter end,
any forward-looking statements, whether as a result the next listed holding is selected and discussed.
Davis Advisors
2949 East Elvira Road, Suite 101, Tucson, AZ 85756
800-717-3477, davisadvisors.com
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