Name: Japan is looking expensive, says Oakmark's David Herro on international investing opportunities
Uploaded: 2026-01-28T01:51:04+00:00
Duration: 397 s

Speakers

David Herro — Co-CIO, Oakmark

Summary

David Herro, Oakmark co-CIO, discusses international investing opportunities on CNBC's Fast Money. He argues non-U.S. equities and currencies are undervalued, with the dollar's reversal and foreign earnings growth supporting a revaluation. He highlights non-U.S. pharma, consumer staples, luxury goods, European multinationals, and BMW, while warning that Japanese equities look expensive relative to their low returns on equity and capital.

David Herro sees a turn in international equities after years of dollar-driven underperformance.
He says foreign stocks remain at a 25-30% discount to U.S. stocks versus a normal 10-15% discount.
He favors non-U.S. pharma names like AstraZeneca, Roche, and Novartis.
He names Danone and Unilever as attractively priced consumer staples.
He cites LVMH, Kering, and Richemont as luxury value opportunities after China weakness.
He likes European global businesses, especially BMW, for its cash flow yield and global revenue mix.
He views Japanese equities as expensive due to low ROE and margins relative to valuation.

Ideas

David Herro Co-CIO, Oakmark 0:43

Foreign equities deeply undervalued, dollar weakening.

International/non-U.S. equities have underperformed because of the strong dollar and massive U.S. multiple expansion while foreign stocks de-rated. He sees a turn: the dollar is reversing, foreign earnings growth is coming through, and foreign stocks still trade at a 25-30% discount to U.S. stocks versus a normal 10-15% discount. With undervalued currencies, both foreign equity valuations and currencies have room to revalue.

David Herro Co-CIO, Oakmark 2:18

Dollar has room to weaken.

The strong dollar has been a major headwind to international equities, but it has only given back a small part of its prior rise. He believes currencies are undervalued and there is still room in the dollar to fall, which would support foreign assets.

David Herro Co-CIO, Oakmark 2:52

Non-U.S. pharma offers attractive value.

Non-U.S. pharmaceuticals, especially in Switzerland and the UK, are strong businesses selling at attractive valuations. AstraZeneca, Roche, and Novartis are named as good-value examples.

David Herro Co-CIO, Oakmark 3:19

Staples like Danone, Unilever attractively priced.

Consumer staples, particularly non-U.S. staples, look very attractively priced after investors previously paid up for stability. Danone and Unilever are named as examples.

David Herro Co-CIO, Oakmark 3:28

Luxury stocks cheap on China weakness.

European luxury goods have been de-rated because of weakness in the Chinese consumer and the popping of China's real estate bubble, but these are global businesses now trading at valuations rarely seen on normal earnings. LVMH/Louis Vuitton, Kering, and Richemont are named as good value.

David Herro Co-CIO, Oakmark 4:04

European global businesses unfairly de-rated.

European companies are often avoided because Europe is slow-growth, bureaucratic, and overregulated, but many are global businesses with sales diversified across Asia, Europe, and North America. Their valuations are punished merely for where they are listed, creating opportunity.

David Herro Co-CIO, Oakmark 4:17

BMW cheap, global, strong cash flow.

BMW is a global business with roughly one-third of sales each in Asia, Europe, and North America, but it is valued as if its European domicile is a problem. It has a free cash flow yield well over 10% and is probably growing 4-5%, making it an especially attractive opportunity.

David Herro Co-CIO, Oakmark 4:52

Japanese equities expensive on weak returns.

Japanese equities are expensive on a quality-adjusted basis: average ROE is only 8-9% versus U.S. companies in the 20s and European companies in the high teens, and margins and returns on capital are low. Even after de-rating from 1989, the market trades around 18-19x earnings, so what investors get for the price is not there and value is hard to find.

Japan is looking expensive, says Oakmark's David Herro on international investing opportunities

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