Davis Select International ETF (DINT)

What is the Davis Select International ETF, and how is it different from an index fund?

DINT is an actively managed exchange-traded fund that holds a concentrated portfolio of international equities chosen by the investment team at Davis Advisors. Unlike a passive index fund, which attempts to track a predetermined benchmark by holding all or most of its constituents, DINT’s managers make stock-by-stock decisions based on fundamental research. The portfolio typically holds 40–80 companies across developed markets outside the US and Canada. The fund is not trying to match the MSCI EAFE Index or any other yardstick; it is trying to outperform it by finding undervalued, high-quality international companies that the broader market has mispriced or overlooked.

What is Davis’s investment philosophy, and how does it show up in DINT?

Davis Advisors is a storied name in value investing, built on the principle that the best long-term returns come from buying quality companies when they are priced like mistakes. The firm’s founders and senior partners were early students of the value-investing tradition, and that lens carries through into DINT. The fund looks for companies with strong competitive positions, durable earnings power, and management teams with skin in the game (high insider ownership). It then buys them when the market is pessimistic and prices have sagged. This approach requires patience and conviction — it means sitting through periods when other strategies are in favor — but it aims to deliver superior returns over longer periods by exploiting temporary market dislocations.

What kinds of companies does DINT actually hold?

The fund’s portfolio reflects the characteristics Davis looks for: profitable, established firms with real competitive advantages, trading at valuations that offer a margin of safety. Typical holdings have included European banks and insurers, Japanese industrials and manufacturers, Australian mining and infrastructure companies, and consumer-staple businesses across the developed world. Because Davis tends to favor companies with sustainable earnings, the portfolio is rarely heavy in early-stage growth or speculative businesses. The fund also has a tilt toward firms where managers and founding families own significant stakes—a Davis principle that alignment between management and shareholders matters for long-term value creation.

Sector allocations shift based on opportunity. During periods when financials are beaten down but fundamentals are sound, the fund might be overweight banks. When industrial cyclicals are in a trough, it might emphasize those. This flexibility—the ability to move capital toward wherever the value opportunity is largest—is one of the advantages active management claims over indexing.

What does it cost to own DINT, and is active management worth the price?

DINT’s expense ratio is higher than a passive international index ETF—typically in the 0.60%–0.70% range, compared to 0.10%–0.20% for a passively managed alternative. Over a decade, that difference compounds into a meaningful drag. For an active fund to justify its fees, it must deliver outperformance greater than those costs, and often it does not. However, Davis’s long-term track record on international investing has been competitive, and the firm’s value discipline and deep research capabilities have produced above-average returns in multiple market cycles. The question every investor must ask is whether the past decade of returns—which have been disappointing for value investors globally—represents a flaw in the strategy or a temporary wind against it.

What are the principal risks specific to DINT?

The first risk is manager dependency. Active funds live or die by the quality of the team making decisions. If key investors leave, if the team becomes more political, or if the discipline that made the strategy work erodes, the fund’s performance can deteriorate sharply. Davis has maintained a relatively stable team, but this is always a consideration.

The second risk is style drift. When value investing is out of favor (as it has been in recent years), the pressure on active managers to chase performance and abandon their discipline is immense. DINT has generally held its ground, but any active fund can drift if management falters.

Third is concentration risk. The portfolio typically holds 40–80 names, which is smaller than many international indices. A single bad position or incorrect call on a major holding can have outsized impact. This concentration is deliberate — Davis believes that if it identifies undervalued companies, owning fewer of them at larger positions improves returns — but it also means investors are making a bet on the manager’s stock-picking skill.

Fourth is the standard currency risk that any international fund carries. Because the fund does not hedge currency exposure, movements in exchange rates can amplify or dampen the returns of the underlying stock positions.

Finally, there is opportunity cost. If the market’s long-term preference for growth over value persists, a value-oriented international fund may lag significantly for years, even if the underlying stocks are genuinely undervalued. Patience is not rewarded if the patience never ends.

How should I research DINT before buying?

Begin with the fund’s factsheet and prospectus, available from the fund company. These will show the current holdings, sector allocations, and performance against relevant benchmarks like the MSCI EAFE Index. Compare DINT’s returns over rolling periods—one year, three years, five years, ten years—against passive alternatives. If DINT is ahead after fees, the case for active management is stronger; if it is behind, ask yourself why you are paying for the extra cost.

Look at the top ten holdings and research them as you would any stock pick: understand what makes each one valuable and whether you agree that it is underpriced relative to its earnings power. If the companies in the fund look like value traps rather than genuine bargains with hidden worth, that is a signal about the fund’s health.

Finally, read Davis Advisors’ shareholder letters and commentary if available. They often explain the fund’s positioning and philosophy in a way that helps you decide if this is the kind of strategy you can hold through cycles when it is underperforming. Value investing requires conviction.