Dodge & Cox Stock Fund's 2nd-Quarter Commentary

Market Commentary

U.S. equity markets rose during the second quarter of 2023, amid resilient economic growth and a pause in interest-rate hikes by the Federal Reserve. The S&P 500 Index appreciated 8.7% during the quarter and has gained more than 20% from its October 2022 low. The Information Technology and Communication Services sectors—some of the worst-performing sectors in 2022—drove the S&P 500’s performance in the first half of 2023, fueled by excitement about artificial intelligence. Conversely, Energy, the best-performing sector of 2022, was the worst-performing sector during the past six months due to lower commodity prices. Market leadership has been concentrated, with seven stocks in the S&P 500 accounting for 74% of the Index’s performance year to date.2

The valuation disparity between U.S. value and growth stocks3 widened in the second quarter and first half of 2023, after narrowing in 2022. Value stocks underperformed growth stocks by 8.7 percentage points in the second quarter.4 The Russell 1000 Value ended the quarter trading at 15.6 times forward earnings5 compared to 27.6 times for the Russell 1000 Growth Index.6

Portfolio Strategy

The Fund had a positive absolute return in the second quarter of 2023. While it underperformed the S&P 500 by 3.1 percentage points, the Fund outperformed the Russell 1000 Value by 1.5 percentage points.7 The Fund’s underweight position and holdings in the Information Technology sector were the biggest detractors from its relative performance versus the S&P 500. The largest three Information Technology companies in the S&P 500 Index—Apple, Microsoft, and NVIDIA—comprised 17.3% of the Index on June 30 and accounted for over 40% of the Index’s return in the second quarter. Of these three companies, the Fund held only an underweight position in Microsoft8 (2.6% of the Fund’s net assets compared to 6.8% of the S&P 500).

As a result of our value-oriented investment approach and focus on individual security selection, we increased the Fund’s exposure to companies that provide attractive dividends and are selling at reasonable valuations in more stable sectors, including Health Care and Utilities. During the second quarter, we initiated a position in Norfolk Southern, a railroad company that we believe can benefit from margin improvement, volume growth, and multiple expansion over the longer term, despite the negative impact of the recent train derailment in Ohio. We also reduced the Fund’s exposure to companies that saw their valuations increase, including Meta Platforms, General Electric, and FedEx. The Fund remains overweight the Financials, Health Care, and Communication Services sectors.

Overall, we believe the Fund’s diversified portfolio is well positioned and could benefit if the wide valuation disparity between value and growth stocks narrows. The Fund’s portfolio trades at 12.5 times forward earnings, well below the S&P 500 and Russell 1000 Value’s valuations of 20.1 and 15.6 times, respectively. We believe patience, persistence, and a long-term investment horizon are essential to investment success, and we are confident in our portfolio and investment approach. Thank you for your continued confidence in Dodge & Cox.

Performance Review (Fund’s Class I Shares vs. S&P 500) Second Quarter

Key contributors to relative results included the Fund's:

• Stock selection in Consumer Staples—especially Molson Coors (TAP, Financial)— and underweight position in the sector; and
• Positions in Wells Fargo (WFC, Financial), Dell Technologies (DELL, Financial), VMware (VMW, Financial), and Capital One Financial (COF, Financial).

Key detractors from relative results included the Fund's:

• Information Technology holdings, particularly the underweight position in Microsoft (MSFT, Financial) and not owning NVIDIA (NVDA, Financial) or Apple (AAPL, Financial);
• Health Care overweight and holdings, including Gilead Sciences (GILD, Financial), Regeneron Pharmaceuticals (REGN, Financial), Sanofi (SNY, Financial), and Incyte (INCY, Financial);
• Stock selection and underweight position in Consumer Discretionary; and
• Positions in Occidental Petroleum (OXY, Financial), Anheuser-Busch InBev (BUD, Financial), and MetLife (MET, Financial).

Year to Date

Key contributors to relative results included the Fund's:

• Industrials holdings, notably General Electric (GE) and FedEx (FDX);
• Stock selection in Consumer Staples—including Molson Coors— and underweight position in the sector;
• Underweight position in Utilities; and
• Positions in Fiserv (FI) and Alphabet (GOOG).

Key detractors from relative results included the Fund's:

• Information Technology holdings, largely the underweight position in Microsoft and not owning Apple and NVIDIA;
• Financials overweight and holdings, particularly Charles Schwab (SCHW), MetLife, and Fidelity National Information Services (FIS);
• Health Care holdings—including Cigna (CI), Gilead Sciences and Incyte—and overweight position;
• Underweight position in Consumer Discretionary, especially in Amazon (AMZN), and not owning Tesla (TSLA); and
• Energy overweight and selected holdings, especially Occidental Petroleum.

Second Quarter

Key contributors to relative results included the Fund's:

• Information Technology overweight position and specific holdings, especially Microsoft, VMware, and Dell Technologies;
• Underweight position in Utilities;
• Stock selection in Consumer Staples, specifically Molson Coors;
• Financials overweight and holdings, including Wells Fargo, Capital One Financial, and Fiserv; and
• Positions in Alphabet, Amazon, and Johnson Controls International (JCI).

Key detractors from relative results included the Fund's:

• Health Care holdings—particularly Gilead Sciences, Incyte, and Regeneron Pharmaceuticals—and overweight position; and
• Positions in Occidental Petroleum, Anheuser-Busch InBev, and underweight exposure to Meta Platforms (META).

Year to Date

Key contributors to relative results included the Fund's:

• Stock selection in Industrials, particularly General Electric and FedEx;
• Information Technology overweight position and certain holdings, notably Microsoft and Microchip Technology (MCHP);
• Underweight position in Utilities;
• Consumer Discretionary holdings, particularly Amazon;
• Stock selection in Consumer Staples, mainly Molson Coors; and
• Positions in Alphabet, Fiserv, Capital One Financial, and Sanofi.

Key detractors from relative results included the Fund's:

• Financials holdings—particularly Charles Schwab, MetLife, and Fidelity National Information Services—and overweight position; and
• Positions in Occidental Petroleum, Cigna, Incyte, Gilead Sciences, DISH Network (DISH), BioMarin Pharmaceuticals (BMRN), and underweight exposure to Meta Platforms.

1. All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ total returns include the reinvestment of dividend and capital gain distributions, but have not been adjusted for any income taxes payable by shareholders on these distributions or on Fund share redemptions. Index returns include dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. The Russell 1000 Value Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
2. The top-seven contributors to the S&P 500’s absolute returns in the first half of 2023 were Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta Platforms, and Tesla.
3. Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks.
4. For the second quarter of 2023, the Russell 1000 Value Index had a total return of 4.07% compared to 12.81% for the Russell 1000 Growth Index. The Russell 1000 Growth Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
5. Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change.
6. Unless otherwise specified, all weightings and characteristics are as of June 30, 2023.
7. Return for the Stock Fund’s Class I shares.
8. The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings.

The information provided is not a complete analysis of every material fact concerning any market, industry or investment. Data has been obtained from sources considered reliable, but Dodge & Cox makes no representations as to the completeness or accuracy of such information. The information provided is historical and does not predict future results or profitability. This is not a recommendation to buy, sell, or hold any security and is not indicative of Dodge & Cox’s current or future trading activity. Any securities identified are subject to change without notice and do not represent a Fund’s entire holdings. Dodge & Cox does not guarantee the future performance of any account (including Dodge & Cox Funds) or any specific level of performance, the success of any investment decision or strategy that Dodge & Cox may use, or the success of Dodge & Cox’s overall management of an account.

The Fund invests in individual stocks and other securities whose market values fluctuate within a wide range, so that your investments may be worth more or less than its original cost. The Fund's performance could be hurt by equity risk, market risk, manager risk, liquidity risk, and derivatives risk. The Fund may use derivatives to create or hedge investment exposure, which may involve additional and/or greater risks than investing in securities, including more liquidity risk and the risk of a counterparty default. Some derivatives create leverage.

Before investing in any Dodge & Cox Fund, you should carefully consider the Fund’s investment objectives, risks, and charges and expenses. To obtain a Fund’s prospectus and summary prospectus, which contain this and other important information, or for current month-end performance figures, visit dodgeandcox.com or call 800-621-3979. Please read the prospectus and summary prospectus carefully before investing.