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Commentary Oldfield International Value Fund Second Quarter 2021 Commentary

The iMGP Oldfield International Value Fund returned 4.94% during the second quarter of 2021, beating its benchmark MSCI EAFE Value NR (+3.01%), and slightly behind MSCI EAFE NR (+5.17%). The fund was ahead of the Morningstar’s Foreign Large Value Fund peer group, which was up 4.16%.

Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit

Commentary from Oldfield Partners

The last two weeks of June saw a reversal in the ‘Value trade’ as it has been termed. The relative recovery in value stocks had been a trend in place ever since the announcement of the vaccine on 9th November 2020. The Federal Reserve released its statement mid-June and indicated that although there are clear signs that inflation is picking up, they saw this as ‘transitory’ and that they expected ‘to maintain an accommodative stance’. The heady mix of continued fiscal and monetary stimulus globally, amplified by the economic recovery has pushed the stock market higher. Valuations, which some time ago lost their role as an anchor, once again seemingly no longer matter given the continued flood of liquidity and asset prices powered ahead. This has led to unprecedented risk-on behavior that has spilled into the technology sector, whilst as Bernstein states in a recent research report “Overall Value stocks remain the most uncrowded part of the market”.

Discussion of Performance Drivers

Portfolio managers Nigel Waller and Andrew Goodwin build the iMGP Oldfield International Value portfolio stock by stock, focusing on only their highest-conviction ideas and ensuring proper diversification across regions, sectors, and other investment drivers that companies in their portfolio may have in common. As such, sector and country allocations are largely a byproduct of their stock picking.

Sector WeightsFundiShares MSCI EAFE Value ETF
as of 3/31/2021
Communication Services7.2%6.5%
Consumer Discretionary7.3%9.3%
Consumer Staples4.5%6.7%
Health Care & Pharmaceuticals13.6%8.7%
Information Technology5.6%3.0%
Real Estate0.0%5.1%
Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Regional AllocationFundiShares MSCI EAFE Value ETF
as of 6/30/2021
Australia/New Zealand0.0%7.6%
Asia ex6.0%3.9%
Western Europe and UK61.4%62.3%
Latin Am4.5%0.3%
North America0.0%0.9%
Middle East0.0%0.6%
Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Our attribution analysis shows:

  • Stock selection was the primary driver behind the fund’s outperformance during the quarter. Sector and regional weightings, a residual of bottom-up stock selection, had a negligible impact on relative performance.
  • British Telecom, up over 25% and the largest holding as of the end of the second quarter, and Embraer, up over 50%, were the top contributors to performance. Both are discussed in detail below.
  • Stock selection was also positive in the consumer discretionary sector, driven by Toyota Motors.
  • Within financials, Lloyds was a positive contributor. This was offset somewhat by Exor, which was down low single digits percent for the quarter and was a relative drag on performance.
  • In health care, a new holding Fresenius SE contributed positively to performance. Its stock had been under a cloud due to COVID-19, which has meant a decline in the number of patients receiving dialysis in its US business and a deferral of elective procedures impacting its hospital and injectables businesses. In March, the fund’s portfolio managers purchased this stock at a significant discount to its historical valuations.
  • Finally, Nokia was up over 30% on the back of strong operating results. These results came in well ahead of market expectations driven by strong sales in mobile networks and infrastructure and operating margins came in at 10.9%, ahead of management’s guided range for the full year of 7.0% to 10.0%, though in line with Oldfield Partners’ expectations.

Top 10 Contributors as of the Quarter Ended June 30, 2021

Company Name Fund Weight (%) Benchmark Weight (%) 3-Month Return (%)Contribution to Return (%) CountryEconomic Sector
Embraer SA 4.820.0051.252.08BrazilIndustrials
BT Group PLC7.040.2525.481.70United KingdomCommunication Services
Fresenius SE & Co4.170.2418.580.68GermanyHealth Care
Lloyds Banking Group6.170.5211.370.65United KingdomFinancials
Nokia Oyi1.970.1233.830.59FinlandInformation Technology
Toyota Motor Corp4.661.9812.200.58JapanConsumer Discretionary
Korea Electric Power Corp2.720.005.360.15KoreaUtilities
E.ON SE5.080.272.550.14GermanyUtilities
Svenska Handelsbanken4.050.203.750.13SwedenFinancials
Mitsubishi UFJ Financial Group Inc4.640.770.970.04JapanFinancials
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Edited Oldfield Commentary on Selected Contributors


The incumbent telecom operator in the UK, its share price had collapsed from around 500p to 100p, as investors’ despondency grew given its regulatory headwinds, declines in traditional telephony, pension deficit expansion due to seemingly ever-lower real bond yields and growing capital demands. The value of its Openreach business, the infrastructure backbone of the UK, we felt alone could justify the whole market value of the group at 100p, but which equated to just 30% of operating income. BT is embarking on the rollout of fiber to the premises and investors rightly fretted about overcapacity and the future return BT could earn on this investment. Something needed to change, and investors needed clarity around this capital spending.

This change finally occurred earlier this year following the outcome of the regulatory review. Greater visibility around these returns has meant that investor confidence is returning. Some analysts are now estimating that BT will earn around a 12% return on its £14 billion fiber investment. This means that over the next 10 years the operating income at Openreach could double, driving up group operating income by some 40%. BT has been one of our best-performing investments over the quarter and over the year to date. Yet, BT still trades on very low valuation multiples, both relative to its own history and to its peers, on a forward price-to-earnings ratio of just 10x and an EV/EBITDA rating of 5x. BT has grown to be the largest investment in the portfolio.

However, we are in no rush to sell and still see it as having one of the highest total returns from current levels over the next two years in the portfolio. We note with interest that during the month a new strategic investor, Patrick Drahi, purchased a 12% stake in BT. The French billionaire has a strong track record of making handsome returns in this sector through his vehicle Altice.


The Brazilian aircraft manufacturer is geared to the recovery in regional jet demand that suffered a sharp downturn at the onset of the pandemic. It is benefiting as the United States gets back on planes for domestic travel and sparks new orders for aircraft. US passenger volumes have recovered to be about 25% below pre-pandemic levels. The share price has had a remarkable rebound and is up around 120% year to date.

In June, there were reports that its nascent electric vertical take-off and landing business Eve will merge with a special purpose acquisition company (SPAC) Zanite Acquisition Corp, which potentially values the stand-alone Eve business at $2 billion. The current market value for the whole of the Embraer group currently stands at $2.7 billion.

Given the nascent nature of the electric vertical take-off (eVTOL) market there is a great deal of uncertainty around the valuation of Embraer’s Eve business. Embraer certainly has the engineering know-how, track record of developing aircraft on budget and on schedule, existing relationships with suppliers and customers, and worldwide operations for production with existing positions in the US and Brazilian markets to ensure a strong position in this developing market. However, we still see the key driver of Embraer as the existing regional jet business, which continues to recover strongly with the company recently revealing new orders for 30 E195-E2 jets from the Canadian regional carrier Porter Airlines with an additional operator’s purchase rights for an additional 50.

Top 10 Detractors as of the Quarter Ending June 30, 2021

Company Name Fund Weight (%) Benchmark Weight (%) 3-Month Return (%)Contribution to Return (%) CountryEconomic Sector
EasyJet PLC4.510.00-8.47-0.42United KingdomIndustrials
Kansai Electric Power Co Inc2.540.08-11.95-0.36JapanUtilities
Exor NV5.830.10-4.80-0.31NetherlandsFinancials
Mitsubishi Heavy Industries4.180.11-5.64-0.24JapanIndustrials
Siemens AG6.051.46-3.70-0.21GermanyIndustrials
Samsung Electro-Mechanics Co Ltd4.090.00-5.13-0.17KoreaInformation Technology
Bayer AG4.990.73-1.60-0.06GermanyHealth Care
Sanofi India Ltd4.960.00-0.120.00FranceHealth Care
Tesco PLC4.720.280.110.02United KingdomConsumer Staples
East Japan Railway Co3.290.210.680.02JapanIndustrials
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Edited Oldfield Commentary on Selected Detractors


Exor (the holding company for the Agnelli family) has typically traded at a large discount to the value of its holdings but it is driving structural reform at these underlying businesses. It continues to hold interests in various entities many of which came from the old Fiat industrial group. One of these holdings is in CNH Industrial, the vehicle and agricultural equipment maker. CNH announced that it had ended talks to sell its truck maker Iveco to China’s FAW Jie fang. Whilst this did create some short-term weakness in the share price of CNH, this only accounts for some 16% of the net asset value at Exor and CNH is continuing to pursue a spin-off strategy for this business, which we anticipate will enhance further shareholder value, demonstrating that the underlying companies under Exor’s leadership continue to drive strategies to enhance shareholder value.


Samsung is a leader in semiconductors, mobile handsets, display and televisions. Its substantial capex and financial resources should maintain its market and technological leadership in many important product areas. Since their January peak at KRW 91,000 the shares have fallen some 10%, despite forecasts largely unchanged. There are some fears that component shortages have held back PC, smartphone and server build, which in turn has curtailed demand for DRAM memory leading to some channel inventory build in the second quarter. However, this is a short-term issue, and these bottlenecks are expected to ease in the second half of this year meaning pricing and margins for Samsung’s memory business will recover. Samsung’s forward price-to-book multiple is 1.9x which is 33% higher than its mid-cycle valuation but remains some 22% lower than its historical peak of 2.4x since 2003, despite peers trading at all-time-high valuation levels (TSMC now trades on 7.0x forward price-to-book value). For a leader in a consolidated industry that is seeing secular growth, this valuation is attractive.

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Mutual fund investing involves risk. Principal loss is possible. Past performance does not guarantee future results. 

The fund will invest in foreign securities. Investing in foreign securities exposes investors to economic, political and market risks and fluctuations in foreign currencies. Though not a small-cap fund, the fund may invest in the securities of small companies. Small-company investing subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies. Investments in emerging market countries involve additional risks such as government dependence on a few industries or resources, government-imposed taxes on foreign investment or limits on the removal of capital from a country, unstable government and volatile markets. A value investing style subjects the fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.

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