Tweedy Browne Fund commentary for the first quarter ended March 31, 2025.
Commentary
Global equity markets got off to a mixed start in 2025, with valuations in many parts of the world still hovering at historically elevated levels, particularly in the United States. Later in the quarter, market volatility ratcheted up in part due to uncertainty around the imposition of tariffs, and their potential impact on prices and economic growth. Performance in global equity markets virtually flipped in response, with non-U.S. equity markets surging well ahead of their U.S. counterparts throughout much of the quarter. The S&P 500 Index declined -4.27% during the quarter, while the MSCI EAFE Index (USD) posted modest gains, buoyed by strength in European markets.
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In this environment of heightened uncertainty, all four of the Tweedy, Browne Funds posted solid absolute and relative returns for the quarter, with each outperforming its respective benchmark index. Returns were particularly strong in our two internationally focused funds, where we saw broad participation across geographies and industry sectors.
The Tweedy, Browne International Value Fund gained 7.36% (net of fees) during the quarter, outpacing both the 6.86% return for its primary benchmark, the MSCI EAFE Index in U.S. dollars, and the 3.36% return for the MSCI EAFE Index (Hedged to USD). The International Value Fund II returned 8.48%, well ahead of its unhedged benchmark. The Value Fund advanced 6.30%, meaningfully outperforming the MSCI World Index in U.S. dollars, which declined -1.79%, and its hedged counterpart, the MSCI World Index hedged back into U.S. dollars which declined -2.58% for the quarter. And finally, the Worldwide High Dividend Yield Value Fund gained 7.22%, in contrast to a -1.79% decline in the MSCI World Index (in USD). We believe these results reflect the benefits of our disciplined, conservative approach, especially in a market wrestling with high valuations and an uncertain policy backdrop. As Benjamin Graham once observed, “The essence of portfolio management is the management of risks, not the management of returns.”
Portfolio Attribution
Please note that the individual companies discussed herein were held in one or more of the Funds during the quarter ended March 31, 2025, but were not necessarily held in all four of the Funds. Please refer to each Fund's portfolio page, beginning on page[ 5], for selected purchase and sale information during the quarter and the notes on page [13] for each Fund's respective holdings in each of these companies as of March 31, 2025.
As deep value managers, we remain disciplined in our approach, seeking out securities that trade at meaningful discounts to our conservative estimates of intrinsic value. We remain particularly cautious in the current environment, where elevated valuation multiples and speculative enthusiasm in certain market segments remind us of past periods of excess. As Warren Buffett has said, “The less prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” The Funds’ first-quarter results were driven more by individual stock performance than by country or sector allocations, which is consistent with our bottom-up, fundamentally driven investment process.
From a country perspective, Switzerland, Germany, and France were notable contributors. Holdings such as Roche, Nestlé, Zurich Insurance, Rheinmetall, and DHL all performed well. France also played a key role, with several industrial and health care holdings advancing smartly. In contrast, Japan was the most significant detractor on a country level, despite our underweighted exposure to the region. Several of our Japanese industrial and materials holdings struggled during the quarter.
Sector attribution painted a broadly favorable picture. Our investments in Industrials were especially helpful, supported by strong performance in companies like CNH Industrial, BAE Systems, and KSB. Health Care stocks also contributed, with Johnson & Johnson and Fresenius among the standouts. Consumer Staples added to returns, buoyed by long-held positions in Nestlé, Heineken, and Coca-Cola FEMSA. Conversely, Financials detracted from relative performance, as the sector modestly rebounded off recent lows and our underweight position limited participation. Materials, particularly our chemicals holdings, also lagged during the period.
At the stock level, top contributors included BAE Systems, which saw continued strength in the defense sector; Rheinmetall, which advanced sharply on continued robust demand; and CNH Industrial, which reported solid industrial earnings. Coca-Cola FEMSA benefited from resilient demand and pricing power in Latin America. Detractors included Diageo, which declined on concerns about global consumer spending, and the possible negative health impact of spirits consumption, as well as Alphabet and FMC Corp, both of which faced industryspecific headwinds.
In the International Value Fund and the Value Fund, both of which hedge foreign currency exposure, currency hedges modestly reduced returns in the quarter. A broadly weaker U.S. dollar meant that gains from foreign currency appreciation were largely offset by our hedging program, particularly with respect to our European and Nordic exposures. While hedging may help to reduce currency volatility over time, it can have a dampening effect on near-term results when the dollar declines.
Portfolio Activity
As you know, while we tend to be measured in our trading activity, preferring to let the passage of time and business performance do the heavy lifting, we did take the opportunity during the quarter to make select changes across our Funds, particularly in light of the increase in market volatility around quarter end.
Among our purchases were Arkema, a French specialty chemicals company; Prudential, a UK-based life insurer with a focus on Asia; Nippon Sanso, a Japanese industrial gas business; and Hana Financial Group, a leading Korean bank. All four of these companies at purchase were trading at material discounts from our conservative estimates of their underlying intrinsic values, were financially strong and, in our view, had solid runways for future growth. We also added to existing holdings such as Nifco, Computacenter, and Takara.
On the sell side, we exited several holdings, including FMC Corp, Porsche, and Tencent. Other sells included Husqvarna and Krones. In addition, we trimmed a number of holdings—often after periods of strong share price appreciation—including Rheinmetall, Safran, and Ionis Pharmaceuticals.
As always, these decisions reflect our bottom-up research process, valuation discipline, and long-term perspective. We continue to look for businesses trading at discounts to our estimates of their intrinsic values, with sound balance sheets and, in our view, enduring competitive advantages and management teams that treat shareholders like partners.
Outlook
Just after quarter’s end, global equity markets experienced notable declines in response to President Trump’s announcement of sweeping new tariff measures, which, in turn, have reignited concerns about global trade frictions and economic growth. Measures of market volatility such as the VIX are also on the rise. In addition, massive levels of public and private debt, a stubborn and persistent inflation, and elevated intermediate-term and long-term interest rates lurk on the periphery. Investors have clearly begun to factor all of this into their investment calculus. The market reaction is not surprising to us, especially in light of the backdrop of elevated equity valuations, particularly in the United States. While it is too early to fully assess the long-term implications, we may very well be experiencing the early days of an inflection point in global equity markets. As Chris Browne often cautioned, inflection points in markets often occur when we experience a macroeconomic shock at a time of high equity market valuations. Whether President Trump’s monumental change in trade policy is the macro catalyst that triggers a corresponding sea change in capital markets is anyone’s guess at this point, but the caution lights appear to be clearly flashing.
The good news is that Tweedy Browne portfolios remain, in our view, extraordinarily well positioned in the parts of the global equity market that represent real value, particularly non-U.S. equities, which as previously noted herein, have perked up of late relative to their U.S. counterparts. We continue to uncover considerable opportunity abroad, particularly in smaller and medium-sized European, Asian, and Japanese equities. In all four of our Funds, we have added a plethora of new small and medium capitalization companies over the last several years. As always, we believe that a diversified portfolio of well-capitalized, competitively advantaged companies purchased at sensible valuations offers the best defense against uncertainty. If the past is prologue, that should serve us well over time.
We appreciate your continued trust and patience, and thank you for investing with us.
Roger R. de Bree, Andrew Ewert, Frank H. Hawrylak, Jay Hill, Thomas H. Shrager, John D. Spears, Robert Q. Wyckoff, Jr.
Investment Committee*
Tweedy, Browne Company LLC
April 2025
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