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Annotated article summary from this weekend's Barron's; receive all our Barron's summaries by signing up here:

Driven by a Vision of Global Growth by Sandra Ward

Summary: Barron's interviews David Herro of Harris Associates. His Oakmark International Fund made 31% last year and 13.7% since 1992. He looks for stocks trading substantially below their intrinsic value, with healthy cash flow, and whose management allocates capital astutely.

  • Trusted blue-chip stocks, domestic and global, are "the most attractively priced equity assets out there." Small-caps are trading 15-20% higher than large-caps undeservedly.
  • GlaxoSmithKline (NYSE:GSK) -- still trades at 1990's levels, despite greatly improved earnings power.
  • Top car position: DaimlerChrysler (DCX) ('don't laugh') -- Chrysler is only 20% of the company, which includes a very healthy Mercedes. (Commenting on a potential Chrysler spinoff, Herro says it's probably not the best time to sell, and that DCX would be better served by first ironing UAW issues and generating some cash flow.) He thinks the company's 50% undervalued.
  • Honda Motor Co. (NYSE:HMC) -- a BMW for the masses. It's 20% undervalued.
  • HSBC Holdings (HBC) -- subprime is only about 15% of its business, so the recent selloff has created an opportunity. He also likes banks that have good asset-management businesses, such as Credit Suisse Group (NYSE:CS) and UBS (NYSE:UBS).
  • He thinks some media stocks have value after investors have incorrectly assumed the internet will hog all advertising. He likes Publicis Groupe (NASDAQ:PUB) and British Sky Broadcasting Group (BSY).
Related Links: Daimler-Chrysler: Does Divorce Really Loom? - Barron'sHonda Motor: Why I'm On BoardWill Sub-Prime Loan Defaults Create Another Amaranth?British Sky: In Depth Look at Earnings and Future Prospects

Source: Global Guru David Herro's Eight International Heavyweights