Why We Like Dodge & Cox International Stock

Key Morningstar Metrics for Dodge & Cox International Stock

• Morningstar Medalist Rating: Gold
• Process Pillar: High
• People Pillar: High
• Parent Pillar: High

Dodge & Cox International Stock DODFX remains compelling despite a minor personnel change and middling recent performance. The fund earns High People and Process Pillar ratings.

The fund’s management structure greatly reduces any worries about disruption. A committee of six veteran investors runs the portfolio. A change in early 2024 shouldn’t affect it much. Keiko Horkan, a Japan specialist and a manager here since 2007, stepped off the committee to focus on stock research. China expert Sophie Chen replaced her. That doesn’t necessarily signal a shift toward China and away from Japan—Dodge & Cox International Stock’s portfolio has long been light on Japan-domiciled companies versus the MSCI ACWI ex USA Value Index best-fit benchmark. The committee structure helps gather diverse opinions while tempering strong individual influences. That’s why the fund came through the 2022 retirement of Diana Strandberg, who helped launch this fund, without missing a beat.

The committee is also firmly rooted in Dodge & Cox’s alluring investment ethos. It relies on extensive research produced by talented in-house analysts to invest confidently in businesses that others might find sketchy. This isn’t a fund that piles into junky companies, but it won’t shy away from firms its managers believe face temporary, surmountable challenges. That’s the case with Bayer, for example. The portfolio’s current stake in the German healthcare and crop science company dates to 2011, and since then, the Dodge & Cox team has had to carefully assess Bayer’s fraught acquisition of Monsanto in 2018 and the arrival of a new CEO in 2023. The stock has been a laggard recently, but true to form, Dodge & Cox added to the position in early 2024 as the stock reached its lowest levels in nearly 20 years.

This style of investing produces volatile returns, but patient investors should do well. This has been one of the best offerings in the foreign large-value Morningstar Category over its longest-serving manager’s 20-year tenure.

Though it has looked pedestrian of late, Dodge & Cox International Stock’s substantial personnel resources and proven process, all had for relatively modest fees, are reassuring. It remains a top pick.

Dodge & Cox International Stock: Performance Highlights

From longest-tenured manager Mario DiPrisco’s January 2004 start through April 2024, the fund’s I share class rose 6.8% annualized. That outpaced 96% of its category peers and beat the MSCI ACWI ex USA Value Index category benchmark’s 5.3% gain. The managers’ contrarian investment style can result in volatility, however, and the standard deviation of the fund’s returns (a measure of variability) ranked among the category’s highest over that 20-year period.

That long, successful track record is one reason investors shouldn’t fret about the fund’s mediocre showing since the start of 2023. One of the managers’ biggest calls also needs some time to turn around. The team has seen value in European healthcare stocks for a few years now, but many holdings, including Sanofi and Roche, had a modest to poor 16 months through April 2024.