David Herro on Consuelo Mack's WealthTrack

David Herro, manager of three Oakmark International Funds, provided several useful insights during his recent WealthTrack appearance.

Points of interest:

1) It was mentioned that his portfolio turnover has doubled over the last three years because prices were moving to fair value much quicker than in the past.  His holding period for stocks has fallen from 4-5 years to 2 years.  

2) What it takes to be a truly successful long-term investor:
   a) Need to be grounded.  Have a very sound investment policy.
   b) Apply discipline
   c) Stay in the pocket, don't get rattled, and stick to your investment philosophy

3) What is his value philosophy?
   Value is comprised of two characteristics:
    a) Low in price or "cheap." - Based on free cash to enterprise value.
    b) Quality - Achieve satisfactory rates of return over medium and long-term and management team that      proactively and successfully allocates the free cash of that business.

4) People abandon common sense when macro trends disrupt them.

5) The herd is piled into emerging markets, resource stocks, and energy.  He sees value in Japan, consumer discretionary, and select financials.

6) Notes that it is foolish to view Europe as one asset class.  There is a wide variety of economic conditions in Europe which can be exploited through active investment management.

7) Finds stocks in emerging markets to be expensive.  Anytime there is positive macro trends there tends to be a flood of money into that asset class.

8) Valuation of small cap stocks in US pricey in comparison to large cap.  Believes there is a small discount to fair value for international small cap stocks.