Key Takeaways
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At a time of heightened uncertainty, we are focused on staying invested and calibrating Davis Global ADR SMA portfolio to today’s realities.
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We believe there are practical ways to make intelligent and conscious positioning choices in a difficult environment by being highly selective, tilting towards value, and capturing long-term secular tailwinds that drive earnings growth.
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As near-term visibility is obscured by the different transitions happening simultaneously around the world, the future may be easier to discern—and our view of it is reflected in the portfolio’s holdings in financial, technology, healthcare and other businesses.
Market Perspectives:
Staying Invested
In the first quarter of 2025, the MSCI ACWI (All Country World Index) benchmark declined −1.32% while Davis Global ADR SMA portfolio had a net return of 3.14%, by comparison.
It may be a time of heightened uncertainty but, rather than viewing equities warily as an asset category, we believe it is better to stay invested by calibrating our portfolio to today’s realities.
In our view, there are at least three practical ways to make intelligent and conscious positioning choices in a difficult environment.
First, we believe selectivity matters more than ever. Davis Global ADR SMA portfolio has a focused list of 36 holdings versus the 2,558 stocks in MSCI ACWI. Of course, we think about diversification and attempt to spread risk thoughtfully across holdings, by business type as well as geography. However, in this environment it is valuable to be able to consolidate capital around highly durable businesses and be willing to avoid other stocks, industries and geographies based on risk factors.
In short, this is an environment where investors should adhere to the “know what you own” principle. We would rather hold fewer, larger weightings in companies we know and understand than many smaller positions in less familiar companies.
Second, we believe investors would do well to tilt towards value where it does not involve compromising on the durability of the underlying businesses. When the uncertainty factor is high, paying a lower multiple makes practical sense. It builds more conservative expectations into companies’ share prices. The market may not be grossly overvalued, on the whole, but some areas contain more attractive value opportunities than others. We have positioned Davis Global ADR SMA portfolio accordingly. Its current forward P/E multiple is only 10.3x versus 18.3x for MSCI ACWI.
Third, there are areas of the global economy whose long-term futures look very promising to us. Many of our portfolio companies benefit from long-term secular tailwinds yet trade at a significant discount to the benchmark. We want to capture earnings growth, but avoid overpaying for it. Despite its low relative P/E, Davis Global ADR SMA portfolio’s five-year average earnings per share growth rate is a robust 24.0% versus 14.4% for MSCI ACWI.
Net average annual total returns as of March 31, 2025, for Davis Global Equity SMA Composite with a 3% maximum wrap fee: 1 year, 16.60%; 5 years, 12.04%; 10 years, 6.05%. 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. For current, quarterly returns, please ask your financial advisor to contact Davis Advisors. Current performance may be higher or lower. The investment strategies described herein are those of Davis Advisors. These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However, such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these materials are preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please speak to your Financial Advisor. Davis Advisors fee schedules are described in Part 2 of its Form ADV. The strategies herein may not be suitable or appropriate for all investors depending on their specific investment objectives and financial situation. Potential investors should consult with their financial professional before determining whether to invest in a strategy.
This material 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. Unless otherwise noted, all performance information is as of 3/31/25. The investment strategies described herein are those of Davis Advisors. These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However, such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these Davis Advisors materials are preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please speak to your Financial Advisor.
Portfolio Review:
Positioning for Uncertainty
In the first quarter of 2025, Davis Global ADR SMA portfolio’s positive net return of 3.14% was substantially ahead of the −1.32% decline in MSCI ACWI. On balance, the international holdings in our portfolio outperformed the U.S. component by some margin.
The statistics below illustrate the portfolio’s current positioning:
Selective, Attractive Growth, Undervalued1
| Portfolio | Index | |
| Holdings | 36 | 2,558 |
| EPS Growth (5 year) | 24.0% | 14.4% |
| P/E (Forward) | 10.3x | 18.3x |
The portfolio’s assets are divided rather evenly between U.S. and non-U.S. investments currently.
The areas that interest us most at this time, using bottom-up, company-by-company selection, are: financial services, including well-capitalized banks in both domestic and international markets, predominantly in notable wealth centers; global technology titans engaged in e-commerce, social media, online search and videogaming; healthcare in the U.S.; and food delivery in Asia and Europe, among others.
During the first quarter we pared some of the names that had held up relatively better. Among them was KE Holdings, the largest online real estate transaction platform in China. We reallocated capital to stocks in cheaper areas, including energy businesses, a gaming and real estate company, and an online logistics company that connects domestic truckers and shippers within China, among other investments.
Near-term visibility may be obscured by the complexities of many different transitions happening around the world, but the future may be a little easier to discern. The portfolio’s areas of focus illustrate our point of view.
First, the financial companies in the portfolio include several banks in the U.S., Europe and Singapore with common characteristics. They have unusually high capital ratios, operate in what have been nearly perennial products and services, own a large swath of local market share, and trade at low multiples while offering appealing dividend yields relative to the broader market. A good example is Danske Bank, the largest bank in Denmark and a major supplier of financial services to the northern European region.
In addition, we own two major Asia-Pacific-based multiline insurers that, notably, are leaders in life insurance. This has become a very attractive area of the global economy, in our view. Life insurance still has very low penetration in the Asia-Pacific super region yet the demand for the product keeps growing. Providers are focusing on large countries whose demographics and lack of a social safety net make life insurance particularly valuable to the citizenry. The trend towards greater adoption of life insurance—as well as accident, disability, and health insurance policies—is nascent. However, these mammoth markets in terms of addressable population could extend decades into the future if they mirror the historical experience of life insurance in the U.S. and Japan.
The future of the technology companies in Davis Global ADR SMA portfolio will depend on whether those businesses can remain at the forefront of innovation, protect their market positions competitively, and allocate their vast cash flows intelligently. To own a piece of the global technology industry today, investors need to have a discerning eye, be very selective about which areas of technology look robust for years (or decades) into the future, and exercise discipline when it comes to valuation risk. The technology companies we hold in the portfolio were selected not only for fundamentals but also affordability—that is, the multiples we are willing to pay for the privilege of owning such businesses. Among them is Trip.com Group, which is China’s largest online travel agency and one of the biggest travel service providers in the world.
Healthcare service in the U.S. has been a growing area of interest for us year-over-year. However, given how well some of these positions fared in the first quarter of 2025, they became a net source of cash for new or additional purchases elsewhere in the portfolio.
Aside from these major themes we hold a small number of companies in other areas. They include Teck Resources, a Canadian copper major, and MGM Resorts, a U.S. hospitality and gaming enterprise capitalizing on secular trends in professional sports in Las Vegas. During the quarter we took a new position in Restaurant Brands, a strong U.S. consumer-focused business relatively insulated from global trade uncertainties.
The overarching message is that there are certainly many very attractive opportunities available to global equity investors today. Being selective and striking an appropriate balance of risk and reward are the keys to navigating the current environment of uncertainty.
Outlook:
High-Conviction Opportunities
The global stock market is in fact an enormous market of stocks from around the world. While there may be thousands of securities from which to choose, the good news is that the universe’s vast size constitutes a fertile opportunity set. It only takes a small percentage of those names to construct what we feel is a solid portfolio of our best and highest-conviction ideas.
For more than 50 years we have navigated a constantly changing investment landscape guided by one North Star: to grow the value of the funds entrusted to us. We are pleased to have achieved strong results thus far and look forward to the decades ahead. With more than $2 billion of our own money, we stand shoulder to shoulder with our clients on this long journey.2 We are grateful for your trust and are well-positioned for the future.
Five-year EPS Growth Rate (5-year EPS) is the average annualized earnings per share growth for a company over the past 5 years. The values shown are the weighted average of the 5-year EPS of the stocks in the Portfolio or Index. Approximately 13.40% of the assets of the Portfolio are not accounted for in the calculation of 5-year EPS as relevant information on certain companies is not available to the Advisors’ data provider. Forward Price/Earnings (Forward P/E) Ratio is a stock’s price at the date indicated divided by the company’s forecasted earnings for the following 12 months based on estimates provided by the Fund’s data provider. These values for both the Fund and the Index are the weighted average of the stocks in the portfolio or Index.
As of 3/31/25, Davis Advisors, the Davis family and Foundation, and our employees have more than $2 billion invested alongside clients in similarly managed accounts and strategies.
This material may be shared with existing and potential clients to provide information concerning market conditions and the investment strategies and techniques used by Davis Advisors to manage its client accounts. Please refer to Davis Advisors Form ADV Part 2 for more information regarding investment strategies, risks, fees, and expenses. Clients should also review other relevant material, including a schedule of investments listing securities held in their account.
*As of 3/31/25. Includes Davis Advisors, Davis family and Foundation, and our employees. †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. Five-Year EPS Growth Rate is the average annualized earning per share growth for a company over the past five years. The value for the portfolio is the weighted average of the five-year EPS Growth Rates of the stocks in the portfolio. Approximately 13.40% of the assets of the Portfolio are not accounted for in the calculation of 5-year EPS as relevant information on certain companies is not available to the Portfolio’s data provider. The 5-year EPS of the MSCI ACWI is 14.4%. Forward Price/Earnings (Forward P/E) Ratio is a stock’s price at the date indicated divided by the company’s forecasted earnings for the following 12 months based on estimates provided by the Advisor’s data provider. These values for both the Portfolio and the Index are the weighted average of the stocks in the Portfolio or Index. The Forward P/E of the MSCI ACWI is 18.3x. ‡For information purposes only. Not a recommendation to buy or sell any security. **Sources: Davis Advisors and Wilshire Atlas.
The investment strategies described herein are those of Davis Advisors. These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However, such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these materials are preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please speak to your Financial Advisor.
The performance of mutual funds is included in the Composite. The performance of the mutual funds and other Davis managed accounts may be materially different. For example, the Davis Global Fund may be significantly larger than another Davis managed account and may be managed with a view toward different client needs and considerations. The differences that may affect investment performance include, but are not limited to: the timing of cash deposits and withdrawals, the possibility that Davis Advisors may not buy or sell a given security on behalf of all clients pursuing similar strategies, the price and timing differences when buying or selling securities, the size of the account, the differences in expenses and other fees, and the clients pursuing similar investment strategies but imposing different investment restrictions. This is not a solicitation to invest in the Davis Global Fund or any other fund.
Effective 9/23/14, Davis Advisors created a Global Equity SMA Composite which excludes the institutional accounts and mutual funds. Performance shown from 10/1/14, through the date of this material, the Davis Advisors’ Global Equity SMA Composite includes all eligible wrap accounts with no account minimum from inception date for the first full month of account management and includes closed accounts through the last day of the month prior to the account’s closing.
A time-weighted internal rate of return formula is used to calculate performance for the accounts included in the Composite. The net of fees rate of return formula is calculated based on a hypothetical 3% maximum wrap fee charged by the wrap account sponsor for all account services. For the gross performance results, custodian fees and advisory fees are treated as cash withdrawals.
Davis Advisors is committed to communicating with our investment partners as candidly as possible because we believe our clients benefit from understanding our investment philosophy and approach. Our views and opinions include “forward-looking statements” which may or may not be accurate over the long term. Forward-looking statements can be identified by words like “believe,” “expect,” “anticipate,” or similar expressions. You should not place undue reliance on forward-looking statements, which are current as of the date of this material. We disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. While we believe we have a reasonable basis for our appraisals and we have confidence in our opinions, actual results may differ materially from those we anticipate.
This material discusses companies in conformance with Rule 206(4)-1 of the Investment Advisers Act of 1940 and guidance published thereunder. Six companies are discussed and are chosen as follows: (1–4) current holdings based on December 31 holdings; (5) the first new position; and (6) the first position that is completely closed out. Starting at the beginning of the year, the holdings from a Global Companies model portfolio are listed in descending order based on percentage owned. Companies that reflect different weights are then selected. For the first quarter, holdings numbered 1, 6, 11, and 16 are selected and discussed. For the second quarter, holdings numbered 2, 7, 12, and 17 are selected and discussed. This pattern then repeats itself for the following quarters. If a holding is no longer in the portfolio then the next holding listed is discussed. Each of these holdings must come from a different country. None of these holdings can be discussed if they were discussed in the previous three quarters. If there were no purchases or sales, the purchases and sales are omitted from the material. If there were multiple purchases and/or sales, the purchase and sale discussed shall be the earliest to occur. Other than the recent buy and sell, any company discussed must constitute at least 1% of the portfolio as of December 31.
The information provided in this material does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to buy or sell any particular security. There is no assurance that any of the securities discussed herein will remain in an account at the time this material is received or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of any account’s portfolio holdings. It should not be assumed that any of the securities discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. It is possible that a security was profitable over the previous five year period of time but was not profitable over the last year. In order to determine if a certain security added value to a specific portfolio, it is important to take into consideration at what time that security was added to that specific portfolio. A complete listing of all securities purchased or sold in an account, including the date and execution prices, is available upon request.
The investment objective of a Davis Global Equity account is long-term growth of capital. There can be no assurance that Davis will achieve its objective. Davis Advisors uses the Davis Investment Discipline to invest a client’s portfolio principally in common stocks (including indirect holdings of common stock through depositary receipts) issued by both United States and foreign companies, including countries with developed or emerging markets. The global companies strategy may invest in large, medium, or small companies without regard to market capitalization. The principal risks are: China risk, common stock risk, depositary receipts risk, emerging markets risk, exposure to industry or sector risk, fees and expenses risk, foreign country risk, foreign currency risk, headline risk, large-capitalization companies risk, manager risk, mid- and small-capitalization companies risk, and stock market risk. See the ADV Part 2 for a description of these principal risks.
We gather our index data from a combination of reputable sources, including, but not limited to, Wilshire, Lipper, and index websites.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets throughout the world. The index includes reinvestment of dividends, net foreign withholding taxes. Investments cannot be made directly in an index.
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Global ADR SMA Portfolio
Spring Update 2025