This winning fund manager spills 4 secrets about smart ways to buy non-U.S. stocks

By Michael Brush David Herro is an experienced guide to the global market David Herro has 40 years of investing under his belt and manages $15.3 billion across the Oakmark Global Fund OAKGX and the Oakmark International Fund OAKIX. Besides reasonable stock valuations, Herro looks for superior quality as measured by metrics like return on equity and return on capital. "Value investing it is the price you pay for what you get from an individual company," he says. Herro favors companies where the interests of managers are aligned with shareholders via personal stakes in the company and the right pay incentives. Here are four of Herro's key takeaways on how and where to look for value abroad. 1. Avoid AI Herro isn't in any of the popular AI or data-center stocks, which he could own since his Oakmark Global Fund can invest in U.S. names. "People say, 'There is a boom in AI, let's play the theme,' without even looking at the prices they are paying," Herro says. "That is the antithesis of how we invest. We are underweight AI and data-center stocks." There's another reason beyond valuation: "As value investors, we think there is too much uncertainty." Herro recalls that in the early 2000s, investors piled into companies offering fiber-optic capacity. "But the supply curve shifted much faster than [the] demand curve. Before you knew it, not only was there massive supply, but a lot of these companies were going bankrupt." Nowadays, he notes, data-center companies are quickly expanding capacity, "but we don't know if they will be able to make profits in the medium term." So, he's busy finding attractive value plays outside of AI. "There is a huge global weight of money in narrow areas like AI. When this money begins to fan out of AI, we are extremely well positioned." 2. Own AI 'bank shots' Instead of the direct AI plays, Herro prefers what might be called "bank shot" AI plays. These are names that have "picks and shovels" exposure to data-center expansion, or tech stocks that have been sold off because of misperceived AI risks. Here are three companies Herro singles out: Ashtead Group Ashtead (ASHGY) is in construction- and industrial-equipment rentals. It operaties in the U.S. as Sunbelt Rentals, the second-largest rental business in the U.S. That makes it a play on the AI-related buildout of data centers and power plants. Many of these projects are still in the planning and approval stage. "The next few years will be about putting shovels in the ground," Herro says. "When the construction process starts, you are going to see a massive increase in rental demand." Sunbelt has a diversified revenue stream. It rents equipment used in entertainment events and facilities management. Herro says Ashtead could easily post double-digit annual earnings growth over the next few years, thanks to a combination of sales growth and aggressive stock buybacks. Capgemini Herro favors tech stocks that investors are discarding because they are not AI plays, or because they fear AI will hurt business. Here, he singles out Capgemini (CGEMY), a tech-consulting business that advises clients on what kinds of software and hardware to deploy. Historically, Capgemini has traded at about 20- to 25-times forward earnings. Now, it trades at around 13-times Herro's estimated forward earnings, in part because of AI-related fears. "Investors think AI will replace what they do; we do not think that is the case," he says. "Code writing could be replaced by AI, but the whole integration process still needs humanity." Dassault Systemes This design-software company serving manufacturing giants like Airbus (EADSY), Rolls-Royce (RYCEY) and Volkswagen (VWAGY) is another tech favorite of Herro's that is trading at about half its historical valuation. Dassault Systemes' stock (DASTY) sells for 18-times forward earnings, compared to 30- to 40-times forward earnings historically. Part of the problem is that investors are too busy chasing AI plays, so they overlook Dassault Systemes. The stock is also down because European automakers have been cutting back on research-and-development spending. "But you can't do that forever; they are starting to pick up spending again," says Herro. 3. Ignore country fundamentals Which countries does Herro favor the most? That's the wrong way to think about non-U.S. stock investing, he says. Most large foreign companies get substantial revenue from outside of their home countries. "The growth rate of the company is important, not the growth rate of the home country," he notes. If anything, Herro says, think the opposite way. For example, many investors are skeptical about investing in French companies right now because of the country's budget issues. This has contributed to an attractive discount on shares of Paris-based bank BNP Paribas (BNPQY), which is priced at about 75% of its book value. Yet BNP Paribas is one of the strongest banks in France, Herro says. 4. Second best is good enough if the price is right Herro's fund portfolios own Adidas (ADDYY). The main reason is valuation. "Adidas trades at 15.8-times forward earnings; Adidas at 15.8 is a screaming bargain," he says. Management that took over a few years ago is successfully turning around the company, and that is creating earnings growth. Adidas will get a boost soon from the 2026 FIFA World Cup. Adidas has the exclusive rights to put its brand name on match balls, and it sponsors nearly two dozen teams. Michael Brush is a columnist for MarketWatch. At the time of publication, he owned AMZN, NVDA, MSFT and AVGO. Brush has suggested AMZN, NVDA, MSFT, AVGO and NKE in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks. -Michael Brush This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 12-29-25 1530ET