What a difference a quarter can make! In our last shareholder letter, we wrote about Duerr (XTER:DUE, Financial), a German-based global mechanical and plant engineering firm, which was the biggest detractor from the Fund’s performance for both the third quarter and previous 12 months. This quarter, the company returned 32% and was the Fund’s largest contributor to performance. Investors reacted favorably to Duerr’s third-quarter earnings announcement, which indicated stabilization and improvement across several business lines. One of those lines, HOMAG, a producer of woodworking machines, enjoyed significantly increased orders during the quarter. Importantly, these included a large systems order from China, which has been one of HOMAG’s most troublesome markets. Duerr also announced a new restructuring plan for HOMAG, which should yield significant cost savings. HOMAG’s success is not isolated. Across Duerr’s other business lines, orders have increased and operational performance has improved. Its paint and final assembly division also performed particularly well. Orders improved by 30%, year-over-year, in the third quarter and its operating profit improved by over 9%. Even with Duerr’s strong returns this quarter, we believe it remains an attractive investment due to its strong market position and effective management team.
From David Herro (Trades, Portfolio)'s Oakmark Intl Small Cap (Trades, Portfolio) Fund fourth-quarter 2019 shareholder commentary.
