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It was one other terribly buoyant interval for world fairness markets throughout the third quarter, with each US and non-US fairness markets persevering with to realize new file highs as measured by broad market capitalization-weighted indices such because the S&P 500 Index (“S&P 500”), the MSCI World Index, and the MSCI EAFE Index. The S&P 500 completed the quarter up 8.12% and is up 14.83% year-to-date. As we have now talked about in previous studies, common valuation metrics such because the “Buffett Indicator” and the CAPE-Shiller P/E are actually at or close to file highs. And this has come on the heels of the S&P 500’s back-to-back 26% and 25% calendar yr returns in 2023 and 2024. In the meantime, the MSCI EAFE Index was up 4.77% for the quarter and soared nicely forward of the S&P 500 year-to-date, with a return of 25.14%.
On this continued “danger on” atmosphere, the Tweedy, Browne Funds continued to make monetary progress, however trailed their benchmark indices for the quarter. In distinction, for the year-to-date interval, the Funds produced returns of between 15.98% (Worth Fund) and 23.17% (Worldwide Worth Fund II), and within the case of the Worldwide Excessive Dividend Yield Worth Fund outperformed its respective benchmark index. Whereas our flagship Worldwide Worth Fund underperformed its major benchmark for the year-to-date interval, it considerably outperformed the hedged MSCI EAFE Index, maybe a extra apples to apples comparability for this hedged worldwide worth fund. The currency-hedged Worth Fund additionally surpassed its hedged benchmark for the year-to- date interval. The Worldwide Worth Fund II had the very best absolute return of the 4 Funds year-to-date, returning 23.17%; nonetheless, it trailed its major benchmark, the unhedged MSCI EAFE Index, by 197 foundation factors.* Whereas US equities carried out terribly nicely year-to-date, the excellent news for buyers within the Tweedy, Browne Funds is that non-US equities, notably European equities, have carried out nicely in US {dollars} over the identical interval, producing returns that exceeded these of the S&P 500. As it’s possible you’ll recall, our world funds have traditionally carried an chubby to European equities as valuations had been sometimes extra compelling in Europe. Whereas forex performed a big function within the outperformance of non-US equities in US {dollars}, we welcome the worth recognition in non-US equities that has occurred year-to-date, which in our opinion, is lengthy overdue. Apart from currencies’ function, it’s laborious to know for positive what’s driving this resurgence in non-US equities. We consider that maybe the decline in so-called US exceptionalism, and for positive, a weakening US greenback, has performed a big function. As well as, we consider it may partly be because of the prospects for sturdy protection and infrastructure spending in Europe, and/or the valuation hole that has existed for over a decade and continues to persist between US and non-US equities (see the chart that follows). This hole stays vital regardless of the outperformance of non-US equities year-to-date. We consider that in a world the place inflation stays persistent and rates of interest are normalizing at ranges far above the zero certain of the not-too-distant previous, value as soon as once more issues in investing.
Relative Valuations of Worldwide Indexes vs S&p 500 Trailing P/e Ratios / P/e Ratio of S&p 500
Portfolio Attribution
Please notice that the person corporations mentioned herein had been held in a number of of the Funds throughout the quarter ended September 30, 2025, however weren’t essentially held in all 4 of the Funds. Please refer to every Fund’s portfolio web page, starting on web page 7, for chosen buy and sale info throughout the quarter and the notes on web page 16 for every Fund’s respective holdings in every of those corporations as of September 30, 2025.
Outcomes for the quarter mirrored a market that continued to favor giant, fast-growing corporations over steadier, extra reasonably valued companies. Our Fund portfolios posted constructive absolute returns however usually lagged their benchmarks, which remained closely influenced by a slender group of extremely valued development shares. Japan was as soon as once more among the many stronger markets for our portfolios. Corporations reminiscent of Subaru (OTCPK:FUJHY), Koito Manufacturing (OTCPK:KOTMY), Fuso Chemical, Nifco, and Takara Holdings (OTCPK:TKKHF) contributed positively as earnings remained resilient and a weaker yen continued to help exporters. The atmosphere in Japan has been enhancing for a while, and in our view, company habits there continues to maneuver in a extra shareholder-friendly course. A number of of our European holdings additionally added to outcomes. Safran (OTCPK:SAFRY), the French aerospace provider, benefited from a continued restoration in air journey and provide chain constraints limiting new slender physique airplane deliveries. Rubis (OTCPK:RBSFY), the French vitality distributor, carried out nicely as buyers acknowledged the soundness of its money flows. Ionis Prescription drugs (IONS), a biotechnology firm held in three of our 4 Funds, was one other robust contributor following encouraging scientific outcomes that helped renew investor confidence in its analysis pipeline. Monetary holdings made a smaller however nonetheless constructive contribution. Nationwide Financial institution of Canada (NA:CA) and DB Insurance coverage in Korea supplied some elevate, and different insurers and banks in Europe and Asia carried out fairly nicely.
On the unfavourable aspect, a number of of our European industrial and client corporations confronted headwinds. CNH Industrial (CNHI) and Teleperformance (OTCPK:TLPFY) each declined after issuing cautious outlooks. Heineken Holding (OTCQX:HKHHY) additionally detracted from efficiency outcomes as near-term demand appeared softer than anticipated. Nestlé (OTCPK:NSRGY) was one other notable detractor, and some smaller UK holdings, together with Pets at House (OTCPK:PAHGF) and Grafton Group (OTCPK:GROUF) had been weak amid continued sluggishness within the home UK economic system. The bigger branded spirits firm, Diageo (DEO), additionally disillusioned as demand for spirits, notably from youthful shoppers contracted considerably. In Asia, LG Corp (LGCOY) and Dentium each declined modestly, whereas Azelis Group (OTCPK:AZLGF) and Sopra Steria (OTCPK:SPSAF) gave again a portion of earlier positive aspects. On the sector stage, well being care and financials had been the biggest constructive contributors, whereas industrials and client staples detracted essentially the most. Bigger and mid-sized corporations tended to fare higher than small caps, a sample that has been constant throughout this era of investor choice for perceived security and liquidity. Foreign money actions additionally influenced reported outcomes. The US greenback strengthened modestly in opposition to most main currencies, rising barely versus the euro and Swiss franc and extra notably in opposition to the pound, yen, and Korean gained. This supplied a modest profit for our hedged portfolios, the Worldwide Worth Fund and the Worth Fund, and a slight headwind for our unhedged funds, the Worldwide Worth Fund II and the Worldwide Excessive Dividend Yield Fund. Taken collectively, the quarter’s outcomes weren’t atypical of what one may anticipate from a diversified, bottom-up, price-driven funding course of. We stay centered, largely, on corporations that, in our view, mix monetary energy, affordable valuations, the capability to climate unsure occasions, and the place educated insiders have been making materials, free will purchases of their firm’s shares.
Portfolio Exercise
(An inventory of chosen newly established positions, together with additions, gross sales, and trims of present positions for every Fund, is included with every Fund’s portfolio web page, starting on web page 7.)
Portfolio exercise was measured throughout the quarter, and per our long-term self-discipline. We trimmed or offered holdings that had reached our estimates of worth, and established positions in, or added to, corporations we consider remained attractively priced. Among the many extra notable purchases had been Berkeley Group Holdings (OTCPK:BKGFY) and Breedon Group (OTC:BDRGF), each in the UK. Berkeley, a well-managed homebuilder centered on London and the South East, was bought after a pullback left its shares buying and selling nicely under what we consider to be intrinsic price. In our view, the corporate’s steadiness sheet and capital allocation stay exemplary. Breedon, an aggregates and development supplies enterprise, was added on comparable grounds. We consider its regular demand from infrastructure and restore work could present a sound basis over time. In Europe, we bought Sodexo (OTCPK:SDXAY), the French meals companies and facilities-management firm. After a interval of operational restructuring, we consider that the corporate’s monetary efficiency will enhance, and the shares nonetheless commerce, in our opinion, at an undemanding valuation. We additionally elevated our funding in Azelis Group, a Belgian specialty-chemicals distributor that we consider continues to consolidate a fragmented market with disciplined execution.
In Japan, we initiated a place in Santec Holdings (SNTEF), a producer of optical and laser parts utilized in communications and testing. The enterprise, in our view, is nicely positioned in rising finish markets, and the shares had been buying and selling at an inexpensive a number of of earnings and money circulate. We added to Dentium, the Korean dental-implant producer, after weak point within the share value created a possibility to purchase extra of what we consider is a well- run, cash-rich firm with engaging development prospects. Smaller additions included Johnson Service Group (JNSGF), a UK textile rental and laundering firm benefiting from the post-pandemic restoration in hospitality, and Nakanishi (NKNIF), a Japanese dental-equipment maker with main positions in precision spindles and hand-held grinders. On the promote aspect, we realized positive aspects in BAE Methods (OTCPK:BAESY) and Rheinmetall (OTCPK:RNMBY) after significant appreciation, per our self-discipline of trimming positions as they strategy our estimate of honest worth. We offered Teleperformance after revisiting our evaluation of their medium-term outlooks. Different gross sales included Babcock Worldwide (OTCPK:BCKIF), Chow Sang Sang Holdings (CHWSF), Luk Fook Holdings (OTCPK:LKFLF), Sumitomo Heavy Industries (OTCPK:SOHVY), SKF AB (OTCPK:SKFRY), and Star Micronics (SMIOF), the place we consider our funding theses had largely run their course. Within the Worldwide Excessive Dividend Yield Worth Fund, we added to holdings reminiscent of Arkema (OTCPK:ARKAY), Johnson Service Group, and Sodexo, and trimmed DBS Group (OTCPK:DBSDY) and BAE Methods following robust positive aspects. The fund stays centered on corporations that we consider have aggressive benefits that help resilient money era, and engaging shareholder yields as evidenced by the cost of above common dividends and a willingness to buyback shares when their shares seem like undervalued. Throughout all portfolios, these modest changes nudged exposures barely towards choose cyclical and mid-sized companies in Europe and Japan, financed by trims in names that had superior towards our intrinsic valuation estimates. The important character of our portfolios stays unchanged: a set, largely, of competitively advantaged, financially sound, cash-generating companies that we consider on a bunch foundation commerce at reductions to conservative estimates of underlying intrinsic worth.
Tweedy Information
As talked about in our Q2 Commentary, Tweedy Browne filed for exemptive aid from the SEC to permit for the institution of ETF share courses throughout all 4 of our mutual funds. We had been one in every of over 50 mutual fund funding managers who submitted functions for this exemptive aid and have been ready for SEC approval. We’re happy to report that there’s excellent news on this entrance. Simply after quarter-end, on October third, the US Securities and Trade Fee indicated it supposed to grant the exemptive aid to the quantitative agency, Dimensional Fund Advisors, within the coming weeks until the Fee orders a listening to. In our view, it is a potential game-changer for the standard mutual fund trade. Assuming the approvals come by way of as anticipated, it is going to probably set off a wave of recent ETF launches. We’re excited in regards to the alternative to supply our shareholders a alternative with regards to investing in our funds. As we stated in our Q2 Commentary, whereas we have now all the time tried to handle our funds in a tax-efficient method, it was not possible to disregard the extra tax advantages related to the ETF “redemption-in-kind” fund construction. Whereas it’s nonetheless not but clear whether or not the SEC will grant us this aid, the percentages have actually elevated, and such an end result now seems extra probably. Keep tuned.
Outlook
Wanting forward, we’re inspired by the resurgence of non-US fairness returns, and consider our funds are terribly nicely positioned for no matter could lie forward. If there may be the start of an precise sea change in our world fairness markets favoring non-US equities, our funds will probably proceed to take part. If, then again, world fairness markets face a protracted overdue come-uppance, we consider our funds are more likely to maintain up comparatively higher than broad capitalization-weighted indices. In our lengthy expertise, our funds have sometimes gained essentially the most floor in opposition to indexes in difficult funding environments. Whereas there aren’t any ensures, within the occasion of a downturn, we’re hopeful that sample will persist. As talked about in our semi-annual report, we consider {that a} diversified portfolio of well-capitalized, competitively advantaged corporations bought at wise valuations gives the very best protection in opposition to market uncertainty and resultant volatility. If the previous is prologue, that ought to proceed to serve us, and our buyers, nicely over time.
We thanks on your continued belief and confidence.
Roger R. de Bree, Andrew Ewert, Frank H. Hawrylak, Jay Hill, Thomas H. Shrager, John D. Spears, Robert Q. Wyckoff, Jr.
Funding Committee*, Tweedy, Browne Firm LLC
* Every member of the Funding Committee is a present investor in a number of of the Funds.
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2025