In a recent Q4 2018 commentary, Bill Nygren from Oakmark Funds shared his views on the current fund’s performance and defended its strategy. Mr. Nygren holds the opinion that the companies, in which his fund invested, have performed quite well, but the problem was in the performance of their stocks. It seems that the businesses and stock prices weren’t in sync, which resulted in the fund being down by 17.30% in the fourth quarter of 2018. Mr. Nygren further pointed out that it is should be expected that stock prices and business performances converge in time, but since there cannot be any guarantees, he called on to investors to reexamine their investments and make sure they still believe in Oakmark Fund’s investment strategy and its stock picks.
“I’ll go straight to the conclusion: The stock market looks more attractive to us than it usually does, and the divergence among individual stocks allowed us to structure a portfolio that we believe is more undervalued relative to the market than it usually is. Though the decline has made watching the market painful, we are all gritting our teeth and adding to our personal holdings.”
Mr. Nygren began analyzing the fund’s holdings with stocks that it finds undervalued despite GAAP metrics that make them seem highly priced. Around 15% of Oakamrk Funds’ portfolio make these companies: Alphabet, Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Facebook, Inc. Common Stock (NASDAQ:FB), MGM Resorts International (NYSE:MGM), Netflix, Inc. (NASDAQ:NFLX), News Corporation (NASDAQ:NWSA), and Gartner Inc (NYSE:IT). “In each case, we believe that either expenses as defined by GAAP are penalizing current earnings more than is economically appropriate or that assets with substantial long-term value are not producing significant income. Our willingness to invest in these companies has been—and we believe will continue to be—a positive differentiator for