The Oakmark Global Select Fund's Investor Share Class experienced a demanding second quarter in 2025, falling short of its benchmark, the MSCI World Index, both during the quarter and since its establishment. This period saw mixed results across sectors, with financials and industrials demonstrating strength, while healthcare and energy faced headwinds. Geographically, the fund maintains a significant concentration in the U.S., complemented by substantial allocations in Europe and the U.K. Amidst market fluctuations influenced by external factors, the fund strategically adjusted its holdings, introducing new positions in key companies across diverse industries. This tactical recalibration reflects a commitment to enhancing long-term value despite immediate market challenges, underscoring a dynamic investment approach.

This quarter's activity was notably higher than usual, spurred by significant market volatility. The fund's management capitalized on these shifts by reducing exposure to strong performers and increasing investments in companies where market perception had created substantial discounts relative to their intrinsic value. This proactive portfolio management led to the acquisition of four new companies and the divestment of three existing holdings, aiming to position the fund for optimal future returns. These adjustments highlight the fund's adaptable strategy, focusing on intrinsic value and long-term growth opportunities, even in an unpredictable economic climate.

Navigating Market Dynamics and Strategic Adjustments

In the second quarter of 2025, the Oakmark Global Select Fund, specifically its Investor Share Class, faced an uphill battle, trailing behind the MSCI World Index for both the recent quarter and its entire operational history. Sector-wise, the fund saw its fortunes buoyed by robust performances in the financial and industrial sectors. Conversely, the healthcare and energy segments acted as performance inhibitors, contributing negatively to the overall results. From a geographical standpoint, the fund's portfolio is predominantly invested in the United States, accounting for over 60% of its assets. A quarter of its investments are in Europe, excluding the U.K., with a smaller portion allocated to the U.K. itself. During this period, certain European markets like France, the Netherlands, and Germany emerged as strong relative performers, contrasting with the underperformance observed in the U.S., China, and the U.K.

The quarter was marked by an elevated level of portfolio activity, largely attributed to the pronounced market volatility following significant global announcements. This environment presented unique opportunities for the fund to realign its holdings. The investment team made calculated decisions to trim or divest positions in companies that had performed strongly, concurrently acquiring shares in businesses whose valuations had become particularly attractive due to perceived impacts from external policies. These strategic maneuvers led to the addition of four new companies to the fund's diverse portfolio: Becton, Dickinson and Company; BMW; BNP Paribas; and DSV. These new acquisitions replaced three previously held positions, reflecting a dynamic and forward-looking approach to optimizing long-term returns amidst fluctuating market conditions.

Key New Investments and Core Holdings' Performance

Among the top performers for the quarter, Bayer stood out as a significant contributor, thanks to its robust first-quarter results that surpassed expectations, especially in its pharmaceutical division. This positive momentum was further bolstered by the anticipation of a favorable Supreme Court decision regarding the company's litigation, signaling potential relief from legal uncertainties. In contrast, IQVIA Holdings emerged as a primary detractor, with its stock price facing downward pressure from concerns over potential drug price controls, tariffs, and government budget cuts. Despite these challenges, IQVIA's contract research organization segment demonstrated resilience, and its technology and analytics solutions performed commendably, underscoring the company's underlying strength and long-term viability, especially given its attractive valuation and management's increased share repurchases.

The fund's strategic new investments are poised to capitalize on various industry trends and undervalued assets. Becton, Dickinson and Company, a global leader in medical technology, was added due to its strong market position, innovation, and attractive valuation, despite temporary headwinds in the healthcare sector. BMW, a premium automotive manufacturer, represents a bet on strong brand equity, strategic management, and a favorable position in the growing electric vehicle market, offering long-term potential amidst trade policy concerns. BNP Paribas, one of the world's largest banks, was included for its diversified operations, solid deposit franchise, and potential for profitable growth, particularly benefiting from a falling interest rate environment. Lastly, DSV, a logistics powerhouse, was chosen for its exceptional management, industry-leading profit margins, and the strategic advantages gained from its recent acquisition, promising continued shareholder value creation through disciplined acquisitions and integration.

Joby Aviation is poised to revolutionize urban transportation, leading the charge in the electric vertical take-off and landing (eVTOL) market. The company's strength lies in its solid financial backing, crucial regulatory advancements, strategic alliances, and a comprehensive approach to aerial ride-hailing. This integrated model, combined with significant strides in FAA certification and exclusive operational agreements in key regions like Dubai, positions Joby for commercial service launch by 2025-2026. Despite the inherent challenges in pioneering a new industry, Joby's strategic execution and commitment to innovation underscore its potential as a transformative long-term investment, targeting a multi-trillion dollar market and forecasting profitability by the next decade.

Market Dominance Through Strategic Innovation

Joby Aviation has established itself as a leading innovator in the burgeoning eVTOL market, setting a high benchmark through its comprehensive strategy that encompasses robust capitalization, accelerated regulatory navigation, and the forging of critical industry partnerships. The company's competitive edge is further sharpened by its commitment to a vertically integrated ride-hailing model, a visionary approach designed to streamline urban air mobility services from manufacturing to direct consumer access. This strategic foresight allows Joby to control key aspects of its operations, ensuring quality, efficiency, and a seamless user experience, which are vital for pioneering a nascent industry.

The firm's unwavering focus on achieving FAA certification remains a cornerstone of its market strategy, with significant progress made towards securing the necessary approvals to operate commercially. These regulatory advancements are complemented by strategic agreements, notably the exclusive rights to operate in Dubai, a move that provides a significant first-mover advantage in a key global market. Furthermore, Joby's efforts in scaling up its manufacturing capabilities are critical, ensuring that the company can meet future demand as it moves closer to its targeted commercial launch in 2025-2026. These combined elements—financial strength, regulatory leadership, strategic alliances, and operational scalability—underscore Joby's ambition to not only enter but dominate the urban air mobility landscape, offering a compelling narrative for investors looking at the future of transportation.

Financial Trajectory and Future Prospects

Joby Aviation's financial outlook paints a picture of a company on the cusp of significant growth, with projections that underscore its potential to capture a substantial share of the multi-trillion dollar urban air mobility market. The company's valuation is intrinsically linked to its anticipated dominance, driven by ambitious revenue and earnings per share (EPS) forecasts that suggest a rapid acceleration in financial performance. This trajectory is expected to culminate in improving profitability around 2030-2031, marking a pivotal transition from a development-focused entity to a commercially viable and self-sustaining enterprise. Such forecasts are predicated on successful market penetration and widespread adoption of its aerial ride-hailing services, which would fundamentally alter urban commuting paradigms.

While the investment proposition in Joby Aviation is compelling due to its innovative technology and ambitious market strategy, it is not without its challenges. The inherent risks associated with bringing a revolutionary technology to market, including the complex process of certification, the demands of scaling production, and the unpredictable nature of public adoption, remain pertinent considerations. However, Joby’s distinct advantages, such as its strong financial position, proactive engagement with regulatory bodies, and strategic partnerships, mitigate some of these concerns. These elements collectively position Joby as a unique and attractive long-term investment for those willing to navigate the complexities and uncertainties inherent in pioneering a new frontier of transportation, offering a blend of high reward potential balanced against manageable risks.