Betting on Today's Losers; International Fund Manager Steers Clear of World's Current Success Stories
David G. Herro, director of international equities for Chicago- based Harris Associates and a childhood fan of the TV game show "Let's Make a Deal," likes to compare three stock market choices that investors can make, each one worth about $20 billion.</br></br>"Behind door number one," he says, "you have Amazon.com, which doesn't generate a profit and maybe never will. Behind door number two, you have every phone company, every cell phone, every fixed telephone line in Brazil, the eighth-largest economy in the world. Behind door number three, you have the entire New Zealand stock market."</br></br>For Herro, the choice is clear. Anything but door number one. "If you take door number one, you're not buying as an owner. You're buying as a speculator," he says.</br></br>Herro, who co-manages both the Oakmark International and the Oakmark International Small Cap funds, believes that investors can find better value in many of the world's battered international markets than they can in the richly valued markets in the United States and Europe. His biggest holdings are in Latin America; Asia outside Japan; and Britain. Rather than fleeing from emerging markets, Herro says he is looking to add to "holdings in businesses that are good and able to withstand the shock" of devaluations, deflation and recession.</br></br>Unfortunately for Herro and his clients, the strategy has yet to pay off. Over the past year, an investor would have been far better off with Amazon.com, which rocketed up tenfold in 1998, than with Oakmark International, whose value dropped 7.01 percent in 1998 even after a strong recovery in the fourth quarter.