Redirection Confirmation

You'll be re-directed to the Financial Professional site.

For Financial Professionals

This website is for Danish professional investors/institutional investors, and not for the general public or retail investors. I confirm that I am a Danish professional/institutional investor, have read the important information and want to continue.  

This site is not intended for U.S. persons. If you are trying to find information about the Dodge & Cox Funds registered for sale in the United States or any other country, click on the country listing at the top of the page to change the country site version.

This site uses "cookies" as described in the Privacy Policy in order for Dodge & Cox to remember your personal preferences and to provide you with a better browsing experience. By continuing, you will be deemed to have accepted the site's use of cookies for this limited purpose. If you do not want this site to place cookies on your computing device, you can manage your web browser's cookie settings by navigating to the program's options menu.
  
TERMS & CONDITIONS OF USE

Use of the Dodge & Cox website ("Site"), owned and operated by Dodge & Cox®, signifies that you accept the following Terms of Use. Nothing contained in these Terms of Use is intended to modify or amend any other written agreement, if any, that may currently be in effect between you and Dodge & Cox or any funds managed by Dodge & Cox. Dodge & Cox may periodically modify these Terms of Use, and any such modifications will be effective immediately upon posting. We suggest that you periodically check these Terms of Use for modifications. If you do not agree to the Terms of Use, do not use this Site.

We suggest that you check the Terms of Use periodically for changes. The Terms of Use can be accessed from the link at the bottom of the Site pages. Dodge & Cox expressly reserves the right to monitor any and all use of this Site, without liability.

PRIVACY

Dodge & Cox expressly reserves the right to monitor any and all use of this Site; any such monitoring will be used for Dodge & Cox’s internal business purposes without liability. Dodge & Cox is committed to maintaining the confidentiality, integrity, and security of your personal and financial data. We consider this information to be private and held in confidence between you and Dodge & Cox. We would like you to know about our policies to protect the privacy of this information.

We may collect personal information about you from:

  • You or your representative in writing, electronically or by phone (e.g., in account applications or requests for forms or literature);
  • Transactions initiated by you or made on your behalf; and
  • Information we receive from third parties, such as financial advisers, consumer reporting agencies, consultants and custodians.

We do not disclose personal information about current or former clients or shareholders to any third parties except as necessary to effect a transaction, administer your account, or as otherwise permitted by law. For example, the Dodge & Cox Funds and Dodge & Cox Worldwide Funds use third-party transfer agents and third-party providers of systems who use your information only to process or analyze transactions you have requested. Contracts with these organizations contain provisions restricting their use of your personal information to those purposes for which they were hired.

We restrict access to personal information about you to those employees and service providers involved in administering or servicing your account(s) or helping us meet our regulatory obligations. We maintain physical, electronic, and procedural safeguards that comply with federal standards to protect your personal information. In addition, our Code of Ethics, which applies to all Dodge & Cox employees, restricts the use of your personal information.

For more information about privacy, please read the Dodge & Cox Privacy Policy.


LIMITED LICENSE AND RESTRICTIONS ON USE


Dodge & Cox grants you a limited, revocable, nonexclusive, nontransferable license to view, store, bookmark, download, and print the pages within this Site solely for your personal, informational, and noncommercial use or as expressly authorized by Dodge & Cox in writing. You are responsible for obtaining and maintaining all equipment, services, and other materials that you need to access this Site. Dodge & Cox reserves all rights not expressly granted in these Terms of Use. Except as otherwise stated in these Terms of Use as expressly authorized by Dodge & Cox in writing, you may not:

  • Modify, copy, distribute, transmit, post, display, perform, reproduce, publish, broadcast, license, create derivative works from, transfer, sell, or exploit any reports, data, information, content, software, RSS and podcast feeds, products, services, or other materials on, generated by or obtained from this Site, whether through links or otherwise (collectively, "Materials");
  • Redeliver any page, text, image or Materials on this Site using "framing" or other technology;
  • Engage in any conduct that could damage, disable, or overburden (i) this Site, (ii) any Materials or services provided through this Site, or (iii) any systems, networks, servers, or accounts related to this Site, including without limitation, using devices or software that provide repeated automated access to this Site, other than those made generally available by Dodge & Cox;
  • Probe, scan, or test the vulnerability of any Materials, services, systems, networks, servers, or accounts related to this Site or attempt to gain unauthorized access to Materials, services, systems, networks, servers, or accounts connected or associated with this Site through hacking, password or data mining, or any other means of circumventing any access-limiting, user authentication or security device of any Materials, services, systems, networks, servers, or accounts related to this Site;
  • Modify, copy, obscure, remove or display the Dodge & Cox, Dodge & Cox Funds, or Dodge & Cox Worldwide Funds name, logo, trademarks, text, notices, or images without Dodge & Cox’s express written permission. To obtain such permission, you may e-mail us at website@dodgeandcox.com; or
  • Include the term "Dodge & Cox®," or any Dodge & Cox trademark or executive's name, or any variation of the foregoing, as a meta-tag, hidden textual element, or any other indicator that creates an impression of affiliation, sponsorship, or endorsement by Dodge & Cox.

COPYRIGHT POLICY, NOTICE AND CLAIM INFORMATION

Dodge & Cox owns and operates this Site. All Materials on this Site, whether separate or compiled, including but not limited to, text, graphics, and audio clips. Logos, buttons, images, digital downloads, data compilations, software, icons, html code and xml code, as well as all copyright, patent, trademark, trade dress, and other rights therein, are owned or licensed by Dodge & Cox® and its third-party information providers, and are protected by United States and international intellectual property laws.

Pursuant to Section 512(c)(2) of the U.S. Copyright Revision Act, as enacted through the Digital Millennium Copyright Act, Dodge & Cox designates an agent as described below to receive notifications of claimed copyright infringement by mail: 
Roberta R. Kameda, Esquire, General Counsel, Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 94104.

The designated copyright agent can also be reached by telephone at (800) 254-8494, by fax at (415) 986-1369, and by e-mail at website@dodgeandcox.com.

LINKING CONDITIONS

You may not link to this Site unless you comply with these linking conditions ("Linking Conditions"). Dodge & Cox grants you a limited, revocable, nonexclusive right to create a hyperlink to this Site ("Link"), provided you comply at all times with the following conditions:

  • The Link must be made to the Funds' home page at www.dodgeandcox.com.
  • The text of the Link must read either “Dodge & Cox”, “Dodge & Cox Funds”, “Dodge & Cox Worldwide Funds”,  or dodgeandcox.com. You may not use any Dodge & Cox logo or graphic or any other Dodge & Cox trademark, as part of the Link without Dodge & Cox's express written permission; and 
  • The Link and surrounding context on the linking site must not: (a) falsely represent or misrepresent any relationship between the linking site and Dodge & Cox, including suggestions of affiliation, endorsement, or sponsorship; (b) portray Dodge & Cox or its affiliates or their products or services, in a false, misleading, derogatory, or otherwise offensive manner; or (c) deliver the Materials in a framed environment or alter the layout, content, look, or feel of the Site.

If you have created a Link that conforms to these Linking Conditions, then you also may include one or more Links to any internal or subsidiary page of this Site that is located one or several levels down from the homepages (known as "deep links"), provided, however, that all such deep links must be in close physical proximity to the Link that conforms to the Linking Conditions. You may not maintain numerous or pervasive Links to this Site.

DATA, INFORMATION AND CONTENT

The Materials on this Site are for information, education, and noncommercial purposes only. Although Dodge & Cox may provide data, information, and content relating to investment approaches and opportunities to buy or sell securities and/or mutual funds, you should not construe any such information or other content available through this Site as legal or tax advice. You alone will bear the sole responsibility of evaluating the merits and risks associated with the use of any Materials on this Site before making any decisions based on such Materials. In exchange for using such Materials, you agree not to hold Dodge & Cox or its affiliates and their directors (trustees), officers, employees, or third-party information providers liable for any possible claim for damages arising from any decision you make based on the Materials made available to you through this Site. By providing access to other websites, neither Dodge & Cox nor any of its affiliates is recommending the purchase or sale of the stock issued by any company, nor are they endorsing services provided by any website's sponsoring organization.

OWNERSHIP OF OTHER MATERIALS

All trademarks, service marks, and logos appearing on this Site are the exclusive property of their respective owners.

All Dodge & Cox graphics, logos, page headers, and service names are trademarks, service marks, or trade dress of Dodge & Cox. Dodge & Cox's trademarks, service marks and trade dress may not be used in connection with any product or service that is not Dodge & Cox's, in any manner that is likely to cause confusion among customers or investors, or in any manner that disparages or discredits Dodge & Cox. Nothing contained on this Site should be construed as granting any license or right in or to any trademarks, service marks, or trade dress of Dodge & Cox.

THIRD-PARTY CONTENT

Data and other materials appearing on this Site that are provided by third parties are believed by Dodge & Cox to be obtained from reliable sources, but Dodge & Cox cannot guarantee and is not responsible for their accuracy, timeliness, completeness, or suitability for use. Dodge & Cox is not responsible for, and does not prepare, edit, or endorse, the content, advertising, products, or other materials on or available from any website owned or operated by a third party that is linked to this Site via hyperlink. The fact that Dodge & Cox has provided a link to a third party's website does not constitute an implicit or explicit endorsement, authorization, sponsorship, or affiliation by Dodge & Cox with respect to such website, its owners, providers, or services.  You will use any such third-party content at your own risk.

WARRANTY DISCLAIMERS

YOU EXPRESSLY UNDERSTAND AND AGREE THAT:

THERE ARE NO IMPLIED OR EXPRESSED WARRANTIES ON THE MATERIALS IN THIS SITE; THE MATERIALS ARE PROVIDED "AS IS" AND "AS AVAILABLE BASIS." DODGE & COX, AFFILIATES, AGENTS, DIRECTORS (AND TRUSTEES), OFFICERS, EMPLOYEES, LICENSORS AND ANY THIRD-PARTY INFORMATION PROVIDERS AND VENDORS DISCLAIM, TO THE FULLEST EXTENT UNDER APPLICABLE LAW, ANY WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER RELATING TO THIS SERVICE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND ALL WARRANTIES REGARDING SECURITY, CURRENCY, CORRECTNESS, QUALITY, ACCURACY, COMPLETENESS, RELIABILITY, PERFORMANCE, TIMELINESS, OR CONTINUED AVAILABILITY, WITH RESPECT TO (I) THE SITE; (II) ANY MATERIALS, PRODUCTS, OR SERVICES AVAILABLE ON OR THROUGH THE SITE; (III) USE OF THE SITE, MATERIALS, PRODUCTS, OR SERVICES; AND (IV) THE RESULTS OF THE USE OF THE SITE, MATERIALS, PRODUCTS, OR SERVICES. FURTHER, DODGE & COX, AFFILIATES, DIRECTORS (AND TRUSTEES), OFFICERS, EMPLOYEES, AGENTS, LICENSORS, AND ANY THIRD-PARTY INFORMATION PROVIDERS AND VENDORS EXPRESSLY DISCLAIM ALL WARRANTIES WITH RESPECT TO ANY DELAYS OR ERRORS IN THE TRANSMISSION OR DELIVERY OF ANY MATERIALS, PRODUCTS, OR SERVICES AVAILABLE THROUGH THIS SITE. EXCEPT AS PROVIDED BY LAW, NEITHER DODGE & COX NOR ITS THIRD-PARTY INFORMATION PROVIDERS AND VENDORS HAS ANY RESPONSIBILITY TO MAINTAIN THE MATERIALS, PRODUCTS, OR SERVICES OFFERED ON THE SITE OR TO SUPPLY CORRECTIONS, UPDATES, OR RELEASES FOR THE SAME. USE OF THIS SERVICE IS AT YOUR OWN RISK. REFERENCE TO A FUND OR SECURITY ANYWHERE ON THIS WEB SITE IS NOT A RECOMMENDATION TO BUY, SELL, OR HOLD THAT OR ANY OTHER SECURITY. IF YOU LIVE IN A STATE THAT DOES NOT ALLOW DISCLAIMERS OF CERTAIN WARRANTIES, SOME OF THE ABOVE EXCLUSIONS MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND MAY HAVE OTHER RIGHTS, WHICH VARY FROM JURISDICTION TO JURISDICTION.

LIABILITY AND INDEMNITY

ANY MATERIALS DOWNLOADED OR OTHERWISE OBTAINED THROUGH THIS SITE ARE DONE AT YOUR OWN RISK. YOU ARE SOLELY RESPONSIBLE FOR ANY DAMAGE TO YOUR COMPUTER SYSTEM OR OTHER EQUIPMENT, OR LOSS OF DOWNLOADED OR OBTAINED DATA THAT RESULTS FROM SUCH DOWNLOAD.

NEITHER DODGE & COX NOR ITS AFFILIATES, DIRECTORS (AND TRUSTEES), OFFICERS, EMPLOYEES, AGENTS, LICENSORS, OR ANY THIRD-PARTY INFORMATION PROVIDERS AND VENDORS WILL BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, REVENUE, INCOME, GOODWILL, USE, DATA, OR OTHER INTANGIBLE LOSSES, OR DAMAGES CAUSED BY THEFT, UNAUTHORIZED ACCESS, SYSTEMS FAILURE, OR COMMUNICATIONS LINE FAILURE, OR THE COST OR PROCURING SUBSTITUTE GOODS OR SERVICES, CAUSED BY THE USE OF OR INABILITY TO USE THE SITE, MATERIALS OR ANY PRODUCTS OR SERVICES PROVIDED HEREIN, OR ANY OTHER MATTER RELATING TO THIS SITE, EVEN IF DODGE & COX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE EXCLUSIONS OR LIMITATIONS MAY NOT APPLY TO YOU. TO THE EXTENT THAT A JURISDICTION DOES NOT PERMIT THE EXCLUSION OR LIMITATION OF LIABILITY AS SET FORTH HEREIN, THE LIABILITY OF DODGE & COX AND ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, LICENSORS, AND ANY THIRD-PARTY INFORMATION PROVIDERS AND VENDORS IS LIMITED TO THE EXTENT PERMITTED BY LAW IN SUCH JURISDICTIONS.

You agree to indemnify, defend, and hold harmless Dodge & Cox, its affiliates, and each of its and their officers, directors (and trustees), employees, and agents, from and against all claims, demands, liabilities, damages, losses, or expenses, including attorney's fees and costs, arising out of or related to your improper access to or use of this Site, or any violation by you of these Terms of Use.

Dodge & Cox does not claim that materials in this Site are appropriate or available for use in all locations. Because of the global nature of the Internet, you agree to comply with all local rules with respect to your online conduct, including all laws, rules, codes, and regulations of the country in which you reside and the country from which you access this Site, including without limitation, all laws, rules, codes, regulations, decrees, acts, orders, directives, legislation, bills, and statutes pertaining to tax, contracts, intellectual property, securities, e-commerce, banking, technology, computers, fraud, and privacy.

Each investment product and service referred to on this Site is intended to be made available only to persons where that product or service is registered and/or licensed for sale or where such registration or licensing is not required. This Site will not be considered a solicitation for or offering of any investment product or service to any person in any jurisdiction where such solicitation or offering would be illegal.

TIMELINESS OF CONTENT

All content on this Site is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

TERMINATION

The rights granted to you herein terminate immediately if you fail to comply with the Terms of Use. Dodge & Cox, in its sole discretion, reserves the right to temporarily or permanently terminate your access to and use of this Site at any time and for any reason whatsoever, without notice or liability. Dodge & Cox will not be liable to you or any third party for any termination of your access to or use of this Site.

INTEGRATION AND SEVERABILITY

If any provision of these Terms of Use is deemed unlawful, void, or for any reason unenforceable, then that provision will be deemed severable from these Terms of Use and will not affect the validity and enforceability of the remaining provisions. The preceding Terms of Use represent the entire agreement between Dodge & Cox and the user relating to the subject matter herein.

Terms of Use as of: February 2022

Skip to main content
 

Paper

Emerging Market Stocks: A Wealth of Opportunities

November 2023

 

Key Takeaways

  • Emerging market equities offer exposure to fast-growing economies and key drivers of global growth. Many companies in developing markets are relatively inexpensive compared to their developed market peers.
  • Investing in a wide range of emerging market stocks, both household names and lesser-known small- and mid-cap securities, gives investors broad diversification and the potential to generate alpha.1
  • Over the past two decades, a portfolio with a blend of the MSCI Emerging Markets Index and the MSCI World Index (developed market equities) would have generated higher risk-adjusted returns than a portfolio comprised of only the MSCI World Index.2
  • The Dodge & Cox Worldwide Funds — Emerging Markets Stock Fund, with its valuation discipline and focus on individual companies around the globe and across the entire market capitalisation3 spectrum, is well positioned to capitalise on the investment opportunities emerging markets offer.

Over the past 40 years, investors have followed the rise of emerging market economies like China and the emergence of global leaders like Taiwan Semiconductor Manufacturing, Tencent, Samsung Electronics, and Alibaba.4 While these companies have become emerging market success stories, many investors may not fully appreciate the breadth of investment opportunities across the developing world. Emerging market businesses—many of them are smaller companies that are not well known outside their home markets—are exposed to powerful economic tailwinds, creating a plethora of potential investment targets.

Our enthusiasm for these opportunities, combined with our global research and deep knowledge of companies across industries, prompted us to create the Dodge & Cox Worldwide Funds — Emerging Markets Stock Fund, the seventh fund we have launched in our firm’s 93-year history. We believe our time-tested, long-term, bottom-up, value-oriented approach is well suited for the challenges and opportunities presented by the emerging markets. We will talk about the Fund later in this paper. To start, we will focus on the emerging markets themselves and what makes them so compelling to us as investors.

Compelling Growth Opportunities

Emerging markets comprise over 80 percent of the world’s population and are responsible for nearly 80 percent of global gross domestic product5 (GDP) growth. Due to its economic success over the last 40 years, China is now the world’s secondlargest economy. Going forward, dozens of other emerging market countries are showing impressive growth and have the potential to also expand rapidly. Many such countries are benefiting from advances in education and technology, the adoption of more market-friendly policies, positive demographic trends, and rising urbanisation. Latin America and Southeast Asian countries are also poised to benefit from the nearshoring6 and friendshoring7 of the global supply chain. This growth story translates into opportunities for companies located or doing business in these markets.

Compared to their developed market peers, many emerging market companies have the potential to increase earnings at a faster rate due to increasing living standards in their domestic markets and rising demand from the rest of the world. That is not to say investing in emerging market companies comes without risks. Many emerging market countries face notable challenges, such as underdeveloped and less resilient economies, greater political instability, and less well-established and predictable legal and regulatory regimes. Emerging market investors may also have less access to reliable, publicly available information about companies. Furthermore, emerging markets suffered disproportionately during the COVID-19 pandemic. However, many emerging economies have since recovered more quickly than some of their developed peers and are now in a better fiscal situation compared to past crises.

Figure 1: Emerging Market Companies Are Relatively Inexpensive11

Source: MSCI, S&P.

Figure 2: Earnings per Share (EPS) Long-Term Growth Rate12

Source: FactSet, MSCI, S&P.

As a group, emerging market companies have lower valuations and higher earnings growth8 than their developed market counterparts (see Figures 1 and 2). Over the past 20 years, the aggregate market value of emerging market companies as a percentage of total global equity market capitalisation has more than doubled (see Figure 3). This shows how quickly emerging markets are growing relative to developed markets and how much the emerging market investable universe has expanded. In 2001, the total market value of the stocks in the MSCI Emerging Markets Index was equal to about 5 percent of the market cap of the MSCI ACWI (All Country World Index).9 That number is currently about 11 percent.10 In addition, companies that are based in emerging markets or largely serve emerging markets currently comprise approximately 30% of total global market cap.

Figure 3. The Emerging Market Investable Universe Has More Than Doubled Over the Past Two Decades

Source: MSCI.

Stock Selection Opportunities

We think of emerging market stocks in two broad categories: very large businesses (many of them household names) and a much longer list of small and mid-sized firms that the typical investor has never heard of (see Figure 4). By our count, there are thousands of investable companies in the emerging market universe.

Figure 4: Including Smaller Companies in the Investable Universe Allows for Greater Diversification

Source: MSCI.

One way to think about this split is by focusing on some of the key engines of global growth. Consider the global digital supply chain that underpins our lives. At one end of the spectrum is Taiwan Semiconductor Manufacturing, one of the world’s largest companies, with a market cap of more than $421 billion. At the other end are Yageo ($7 billion market cap), Nanya Technology ($6 billion), and Powertech Technology ($2 billion), other Taiwanese businesses that manufacture and distribute electronic components. This is a small sample of emerging market opportunities, but the larger point is that the growth of the global supply chain plays a role in the potential success of these smaller companies. We see the same pattern in other factors driving global economic growth—commodity production, e-commerce, and increased penetration of financial products. Emerging market companies of all sizes are providing goods and services the world demands.

Since large-cap emerging market companies are mostly concentrated in the Information Technology and Financials sectors, investors need to be willing to invest in small- and mid-cap companies to achieve broad diversification in emerging markets. Not every emerging market investment will succeed, and finding the hidden gems in the small- and mid-cap world is not simple or straightforward. It requires extensive research and a global reach. But for those with the capabilities, the potential rewards are large. Put another way, we believe the emerging markets are an ideal place for active managers to perform their craft.

Diversification Benefits to Investors

Emerging market equities offer unique opportunities and risks that may complement a diversified portfolio. Investing in emerging markets is typically considered riskier than investing in developed markets. Indeed, over the past two decades, the MSCI Emerging Markets Index has been more volatile than the MSCI World Index of developed market stocks, using the standard deviation14 of monthly returns as a proxy for volatility. Over the same period, the MSCI Emerging Markets Index generated higher returns than the MSCI World Index. That is not surprising. However, investors might be surprised to learn that, over the past two decades, a portfolio reflecting a blend of emerging and developed markets indices would have generated higher returns than a developed markets-only portfolio, with only a modest increase in volatility (see Figure 5, tracking the performance of various blends of the MSCI Emerging Markets and MSCI World Indices).

Figure 5: Exposure to Emerging Markets Has Historically Improved Risk-Adjusted Returns15

Source: Bloomberg, MSCI. Past performance is no guarantee of future results. Index returns include dividends, but unlike Fund returns, do not reflect fees or expenses.

Our Fund

We launched the Dodge & Cox Worldwide Funds — Emerging Markets Stock Fund in May 2021 to offer investors a portfolio that includes the most compelling emerging market investment ideas identified by our global research team. We study a broad research universe of roughly 4,000 emerging market stocks across approximately 60 countries, including many emerging market companies that are not part of the Fund’s benchmark, the MSCI Emerging Markets Index.

We consider companies across the market capitalisation spectrum. Fund holdings include companies based in emerging markets and companies based in developed markets with significant economic exposure to emerging markets.

Casting a wide net means we consider more companies, countries, and sectors than a typical emerging markets fund. Our portfolio includes many stocks that are not household names in the United States. While dozens of Wall Street analysts follow every Fortune 500 company, few analysts cover more than the largest of these emerging market companies. As of 30 September 2023, the Fund had 40 percent of its net assets in small- and mid-cap stocks.16 Many of these smaller-cap holdings have exposure to attractive growth drivers, such as increasing consumption patterns, demand for a broader suite of financial services, expanding telecommunications and internet coverage, and real estate development, to name a few. In some cases, there are no large-cap investment alternatives providing exposure to particular growth drivers. By expanding the universe of potential emerging market stocks to include smaller companies, the Fund’s shareholders get three benefits: 1) greater diversification through exposure to companies, sectors, and regions; 2) additional opportunities to generate alpha through investment in companies not included in commonly tracked indices; and, 3) risk diversification.

Approximately half of the Fund is comprised of smaller positions that are less than 50 basis points.17 Many of these holdings are lesser known small- and mid-cap stocks. Including these companies in our portfolio allows for greater diversification across regions and sectors for the Fund. While we rarely expect to see these smaller positions show up as top- or bottom contributors, in aggregate they have contributed consistently to the portfolio's performance since the Fund's inception.

Like other Dodge & Cox-managed Funds, this Fund has below-average fees and expenses compared to its peers. This Fund's net expense ratio is currently capped at 70 basis points18 versus a median of 77 basis points for actively managed funds within the Morningstar EAA Fund Global Emerging Markets Equity category.19 That difference winds up in the pockets of our shareholders and makes a difference to performance over time.

The Fund is constructed based on Dodge & Cox’s strict valuation discipline and fundamental approach to stock selection, with a portfolio built on the expertise of our global industry analysts. In the years we have spent investing in emerging market companies for other Dodge & Cox mutual funds, we have built tools to enhance our analysts’ ability to identify risks and opportunities in emerging markets. In managing the portfolio, the Emerging Markets Equity Investment Committee also relies upon the breadth of our equity and fixed income research teams. This includes our Macro Analysts who identify the geopolitical and institutional risks that disproportionately affect emerging market currencies and capital markets.

In Closing

As an active manager, the Dodge & Cox Emerging Markets Stock Fund gives us the flexibility to pursue the opportunities we see as most compelling across the developing world. Investors who share our long-term horizon and want exposure to value-oriented companies in difficult-to-access emerging markets should consider our Fund. We look forward to discussing this investment opportunity with you.

Extending Our Global Reach

The creation of our Emerging Markets Stock Fund is the latest stop on our journey to offer our investors access to opportunities around the globe. By the 1980s, it was apparent that more industries were becoming globally competitive, so it no longer made sense to confine our research efforts to American companies. As our analysts evaluated non-U.S. companies, they found a number of strong businesses selling at attractive prices. As a result, we have expanded significantly the range of opportunities available to our clients, first in the United States through the Dodge & Cox International Stock Fund to U.S. investors in 2001, and later to non-U.S. investors through the Dodge & Cox Worldwide Funds — Global Stock Fund (launched in 2009), Global Bond Fund (launched in 2014), and Emerging Markets Stock Fund (launched in 2021).

 

All our Funds benefit from other additions to our tool kit, including macroeconomic analysis, environmental, social, and governance (ESG) research, and quantitative modeling that enable us to measure risk more accurately. Together, these tools have made us stronger global investors.

 

Since 1930, Dodge & Cox has adhered to a consistent approach to investing grounded in our conviction that a combination of fundamental research and a valuation discipline will produce the best results over time. That has not changed. What has changed is the scope of our work. We have pursued a multi-decade quest to expand the scope of our research coverage and analytical skill set in response to the growing global universe of investment opportunities.

Continuously Evolving Our Investment Capabilities

Authors

David Hoeft
Chief Investment Officer, Investment Committee Member, D&C Board Member
Sophie Chen
Investment Committee Member, Global Industry Analyst
Mario DiPrisco
Investment Committee Member, Global Industry Analyst
Rameez Dossa
Investment Committee Member, Global Industry Analyst
Robert Turley
Investment Committee Member, Portfolio Strategy Analyst

Disclosures

This information should not be considered a solicitation or an offer to purchase shares of Dodge & Cox Worldwide Funds plc or a solicitation or an offer by Dodge & Cox Worldwide Investments Ltd. and its affiliates to provide any services in any jurisdiction. A summary of investor rights is available in English at dodgeandcox. com. Dodge & Cox Worldwide Funds plc are currently registered for distribution in Austria, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, South Africa, Spain, Sweden, Switzerland, and the United Kingdom. The Funds may terminate the arrangements made for the marketing of any fund or share class in an EU Member State at any time by using the process contained in Article 93a of the UCITS Directive.

This is an advertising document. First Independent Fund Services AG, Klausstrasse 33, CH-8008 Zurich, is the representative in Switzerland and NPB Neue Privat Bank AG, Limmatquai 122, CH-8024 Zurich, is the paying agent in Switzerland. The sales prospectus, key investor information, copies of the articles of association and the annual and semi-annual reports of the fund can be obtained free of charge from the representative in Switzerland.

Marketing Communication. The views expressed herein represent the opinions of Dodge & Cox Worldwide Investments and its affiliates and are not intended as a forecast or guarantee of future results for any product or service. Please refer to the Funds’ prospectus and relevant key information document at dodgeandcox.com before investing for more information, including risks, charges, and expenses, or call +353 1 242 5411.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.

Endnotes

1 Alpha is a measure of performance and indicates whether an investment has outperformed the market return or other benchmark over some period. Positive alpha means that the investment’s return was above that of the benchmark.
The MSCI Emerging Markets Index captures large- and mid-cap representation across emerging market countries. The MSCI World Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, including the United States. It covers approximately 85% of the free float-adjusted market capitalisation in each country.
Market capitalisation is a measure of the security’s size. It is the market price of a security multiplied by the number of shares outstanding.
4 As of 30 September 2023, Taiwan Semiconductor Manufacturing, Tencent Holdings, Samsung Electronics, and Alibaba Group Holdings were the largest companies in the MSCI Emerging Markets Index.
Gross domestic product (GDP) measures the monetary value of final goods and services—those that are bought by the final user—produced in a country in a given period of time. It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some non-market production, such as defense or education services provided by the government.
6 Nearshoring in the supply chain refers to the practice of outsourcing business processes or services to companies located in neighboring countries.
7 Friendshoring (also known as allyshoring) is the act of manufacturing and sourcing from countries that are geopolitical allies.
8 Earnings growth is the percentage change in a firm's earnings per share (EPS) in a period, as compared with the same period from the previous year.
9 The MSCI ACWI (All Country World Index) Index is a broad-based, unmanaged equity market index aggregated from developed market and emerging market country indices.
10 Unless otherwise specified, weightings and characteristics are as of 30 September 2023.
11 Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. MSCI’s official forward price-to-earnings ratio data is available since 30 June 2003. The MSCI EAFE (Europe, Australasia, Far East) Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, excluding the United States and Canada. It covers approximately 85% of the free float-adjusted market capitalisation in each country. The S&P 500 Index is a market capitalisation-weighted index of 500 large-capitalisation stocks commonly used to represent the U.S. equity market.
12 Calculated using FactSet Market Aggregates' EPS Long-Term Growth Rate formula, which aggregates the individual constituent's long-term growth rate available for any given period. The universe of companies in this calculation is limited to those with available EPS long-term growth estimate coverage.
13 The chart shows the top ten constituents in the MSCI Emerging Markets Index as of 30 September 2023.
14 Standard deviation measures the volatility of the returns. Higher Standard Deviation represents higher volatility.
15 Performance data for the MSCI Emerging Markets Net Total Return USD Index is first available in Bloomberg starting on 31 December 1998. As a result, the first annual period of performance begins on 31 December 1999.
16 Defined as under $10 billion in market cap.
17 One basis point is equal to 1/100th of 1%.
18 Dodge & Cox has voluntarily agreed to reimburse the Dodge & Cox Worldwide Funds — Emerging Markets Stock Fund for all ordinary expenses to the extent necessary to limit aggregate annual ordinary expenses to 0.70% of the average daily net assets of each share class. Dodge & Cox may terminate or modify this agreement upon 30 days’ notice to shareholders.
19 Median of the lowest non-zero share class annual report net expense ratio for U.S. domiciled funds within the Morningstar EAA Fund Global Emerging Markets Equity category (excluding index, enhanced index, and fund of funds). Source: Morningstar Direct (data as of 30 September 2023; downloaded on 16 November 2023). © 2023 Morningstar.