Capgemini (XPAR:CAP, Financial) has also been a long-term holding across other Oakmark Funds and in fact was held in the Oakmark Global Fund as recently as 2021. As we commented in our fourth calendar quarter 2021 letter, we exited Capgemini as the shares approached our estimate of fair value and redeployed the funds into holdings that possessed more attractive return profiles. While we exited Capgemini due to valuation, we continued to follow the business given its high-quality franchise, its very attractive financial model and its strong leadership team. As Europe’s largest IT consulting firm with expertise in digital transformation, Capgemini benefits from strong secular growth tailwinds while its scale enables it to generate high returns on capital with excellent free cash flow conversion. Despite this favorable long-term backdrop, Capgemini’s shares fell significantly from our 2021 exit price on the back of the broad tech sell off as well as shorter term macro concerns, providing us with another opportunity to own this high-quality business at a substantial discount to our estimate of fair value.
From David Herro (Trades, Portfolio)'s Oakmark Global Fund first-quarter 2023 commentary.
