Bill Nygren

Bill Nygren

Last Update: 2014-02-19

Number of Stocks: 55
Number of New Stocks: 2

Total Value: $11,485 Mil
Q/Q Turnover: 4%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Bill Nygren Watch

  • Oakmark's Bill Nygren Discusses Financials, Favorite Stocks



  • Bill Nygren Comments on Franklin Resources

    We established a position in Franklin Resources (BEN), one of the world’s largest global mutual fund companies, with leading products in both equities and fixed income. For starters, we believe asset management is an attractive business and Franklin has a history of strong fund performance across various asset classes and geographies. The company is selling for less than 14x our estimate of this year’s EPS and just over 11x adjusting for net cash and securities. In our view, this is a cheap price for a well-run company in such an attractive industry. Management has historically returned capital to shareholders through stock buybacks and dividends, and with insiders owning 35% of outstanding shares, we expect Franklin to continue to be good stewards of shareholders’ capital.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund first quarter 2014 investor letter.   


  • Bill Nygren Comments on TI

    We also eliminated the remainder of our investment in TI (TI) as the final tranche of shares went long term. TI offers another example of a management team that we believe puts its shareholders first in a situation where many do not. Since its acquisition of National Semiconductor in 2011, TI has been generously returning excess capital to shareholders while maintaining a prudent, but not lazy, balance sheet. This likely contributed to their shares approaching our estimate of fair value. Many large technology companies today simply grow their already immense cash positions and offer little insight into their plans for distributing that excess capital. We believe TI set a terrific example for other companies in the technology sector. Finally, we also sold Newfield Exploration after we came to believe that its effort to transition the company to liquids was a low-return proposition that would limit its ability to grow per-share value.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund first quarter 2014 investor letter.   


  • Bill Nygren Comments on Forest Laboratories

    After returning 40% last quarter, Forest (FRX) returned another 52% in the first quarter as the company agreed to be acquired by Actavis for both cash and stock. We believe the acquisition price was full and fair. While our investment thesis – that Forest’s new drug launches would be successful and leverage the company’s expenses – did not have the chance to transpire, we are more than pleased that the stock price reached our estimated value in short order. It’s not uncommon for the management of companies in transition to resist being acquired before their strategies to create value are fully realized. We applaud the leaders at Forest for their willingness to pull forward this value, even if it denied them the personal satisfaction of seeing their efforts realized in the coming years. We believe this could serve as a lesson for the leadership of other public companies. If someone wants to pay a fair price on a risk-adjusted basis for ‘what could be’ in your business, you owe it to your shareholders to realize this value so that they can recycle their capital into other attractively valued investments.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund first quarter 2014 investor letter.   


  • Bill Nygren's Oakmark Select Fund - First Quarter 2014 Letter

    For the quarter, the Oakmark Select Fund gained 5%, compared to 2% for the S&P 500 Index. We are pleased to report the Fund ended the quarter at a new all-time high NAV, meaning that as of 03/31/14, all current Select shareholders have unrealized gains in their holdings. These strong absolute and relative results were due in large part to Forest Laboratories (Forest) agreeing to be acquired by Actavis Plc in the quarter. Our relatively large exposure to auto-related cyclicals and financials continued to benefit our results. The largest detractors were MasterCard, Kennametal and FedEx. As discussed below, we eliminated our positions in Forest, Texas Instruments (TI) and Newfield Exploration, and we established new positions in Franklin Resources and CBRE Group (CBRE).


    After returning 40% last quarter, Forest (FRX) returned another 52% in the first quarter as the company agreed to be acquired by Actavis for both cash and stock. We believe the acquisition price was full and fair. While our investment thesis – that Forest’s new drug launches would be successful and leverage the company’s expenses – did not have the chance to transpire, we are more than pleased that the stock price reached our estimated value in short order. It’s not uncommon for the management of companies in transition to resist being acquired before their strategies to create value are fully realized. We applaud the leaders at Forest for their willingness to pull forward this value, even if it denied them the personal satisfaction of seeing their efforts realized in the coming years. We believe this could serve as a lesson for the leadership of other public companies. If someone wants to pay a fair price on a risk-adjusted basis for ‘what could be’ in your business, you owe it to your shareholders to realize this value so that they can recycle their capital into other attractively valued investments.

      


  • Bill Nygren Comments on Merck

    We eliminated our position in Merck (MRK) as the shares appreciated to our estimate of fair value.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on General Motors

    Our worst performer was General Motors (GM), down 15%, due to what we believe was the market’s overreaction to GM’s handling of a recent product recall.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on Bank of America

    Another top performer was our largest position, Bank of America (BAC). We still think the financial services sector is attractively valued, and with Bank of America, we are pleased to see investors recognize better visibility of higher future earnings and an enhanced capacity to return excess capital to shareholders.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on Forest Laboratories

    The best performing stock in the quarter was Forest Laboratories (Forest), up 54%. Forest has been an incredibly successful investment for the Oakmark Fund, and we offer our congratulations to the company’s board and management team for maximizing per-share value for shareholders. It has only been one year since we first wrote about our purchase of Forest, and since then, the share price has increased 149%. Please refer to the Oakmark Select commentary for a more detailed description of our tax-efficient sale strategy for Forest.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on Sanofi

    Sanofi (SNY - $52)(SNY)
    Sanofi is a pharmaceutical company with a good mix of durable businesses with strong growth characteristics. The company has a strong franchise in diabetes treatments, maintaining dominant market share in this rapidly growing category. Sanofi is a leading player in emerging markets, where sales growth rates are twice that of the overall pharmaceutical market. Sanofi is also a leader in vaccines, and they have a strong footprint in over-the-counter products. We think that margins and profitability should improve as the company leverages fixed R&D spending and enforces good cost controls. The company’s balance sheet has more cash than debt, and the shares sell at a substantial discount to our estimate of intrinsic value. Moreover, Sanofi has a dividend yield of 3.7%.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on General Mills Inc.

    General Mills, Inc. (GIS - $52)(GIS)
    We believe General Mills is a high quality, well-managed packaged foods company with exposure to fast-growing product categories. The company has an impressive track record of stable earnings growth, and it has consistently returned most of its strong free cash flow to shareholders in the form of share repurchases and dividends. We think revenue and margins will continue to grow, primarily driven by its international business. The company has an attractive global cereal joint venture with Nestle, which often gets overlooked by investors. With consistent profit growth and a shrinking share base, we like its prospects for per-share value growth. In addition, General Mills has a dividend yield of 3.2%.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on Diageo PLC

    Diageo PLC (DEO - $125)(DEO)
    Diageo is the world’s largest spirits manufacturer. Diageo has a portfolio of spirits brands that is among the best in the industry, including a leading scotch franchise that is nearly impossible to replicate. These strong brands are supported by the company’s global scale, which allows for meaningful efficiencies in manufacturing, distribution and marketing. As a result of these advantages, we believe Diageo will maintain its excellent competitive position. At the same time, revenues have grown consistently for years due to a combination of pricing power and emerging markets exposure, and this growth should continue for the foreseeable future. We believe this well-managed company is selling at a large discount to intrinsic value. Further, Diageo has a dividend yield of 2.5%.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren Comments on Citigroup Inc.

    Like its universal bank peers, we think Citigroup is significantly undervalued relative to its normalized earnings power. Unlike its peers, however, it has two hidden sources of value, neither of which is reflected in GAAP earnings: a deferred tax asset and a larger base of excess capital that is growing at a rapid rate. We have long admired Citigroup’s global franchise and its growth potential. One of Citigroup’s key competitive advantages is its unique global reach. Citigroup has more than twice as many country banking licenses and direct local payment network connections as its closest competitor. As a result, we think Citigroup is uniquely positioned to offer corporate clients more visibility into their asset, liability and currency exposures, but requires fewer resources to manage the relationship. We would be remiss not to mention Citigroup’s recent Fed stress test results. Although the qualitative results were disappointing, its quantitative stress test results confirm our analysis that the company has significantly more excess capital than its peers. We expect this capital to eventually benefit shareholders either through capital return or smart balance sheet growth.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund first quarter 2014 commentary.  


  • Bill Nygren's Oakmark Fund First Quarter 2014 Commentary

    The Oakmark Fund increased 2% in the first quarter, fractionally exceeding the S&P 500 gain, which also rounded to 2%. For the first half of our fiscal year Oakmark Fund was up 14%, compared to 13% for the S&P 500. Additionally, the Fund ended the quarter at an all-time high price. Because our goal is to increase the capital of our shareholders, we are always pleased to report new highs.


    After such a strong year for equities in 2013, we are not surprised to see returns moderate as we move into 2014. Stocks certainly aren’t as cheap as they were a year ago, but we are still finding attractive companies to add to the portfolio. At Oakmark, we’re big fans of the Chicago Blackhawks, so as we approach playoff time, we start to think about some of the best hockey clichés. One of our favorites is, “a two-goal lead is the worst lead in hockey.” While we are amused by the fragile logic of this statement, we appreciate the simple message that in a fast-paced, competitive environment, you can’t sit on a lead. At Oakmark, we have an amazing team of research analysts who have remained diligent in uncovering attractive investment opportunities. As you will see below, we added four companies to the portfolio during the first quarter that we think are high-quality and attractively priced.

      


  • Bill Nygren of Oakmark Fund Speaking About Old Tech Firms


    Source: CNBC

      


  • Oakmark's Bill Nygren on Oracle, Intel, Microsoft and Bank of America



  • Bill Nygren Comments on Union Pacific Corporation

    Union Pacific Corporation (UNP - $166)(UNP)
    Union Pacific is the largest freight railroad company in North America, operating primarily in the 23 states west of the Mississippi River.  The company’s nearly 32,000 route miles link the Pacific Coast and Gulf Coast ports with the Midwest and eastern U.S. gateways, and it offers several corridors to key Mexican gateways.  After decades of real rate decreases, a “rail renaissance” began around 2004 when the regulatory backdrop on pricing became more rail-friendly, service levels improved, and rising fuel prices helped rails compete with trucking.  Since then, Union Pacific’s revenues have grown approximately 7% per year, and its operating margin has increased from the low-teens range to the low 30% range.  We believe that these positive trends will continue, albeit at a slower pace, due to pricing power that exceeds inflation and moderate volume growth from an improving economy and a recovery in below-trend categories like housing, construction and agriculture.  Moreover, the company’s profit margin can still improve further, and we expect Union Pacific to return the vast majority of its free cash flow to shareholders via share repurchases and dividends.  We consider the stock to be attractively priced at only 12x our estimate of “normalized” earnings in 2015.

    From Bill Nygren (Trades, Portfolio)'s fourth quarter 2013 commentary.  


  • Bill Nygren Comments on Forest Labs

    As value investors with a long-term horizon, we are happy to patiently wait for undervalued securities to appreciate toward our estimates of intrinsic value.  Occasionally, we are pleased to see the value gap close more rapidly, which is what has happened with Forest Labs over the past three quarters.  Forest Labs appointed a new CEO, who quickly introduced a substantial cost-cutting program and a more shareholder-friendly capital allocation strategy.  These measures helped Forest Labs enjoy a 60% increase in stock price since January 2013.


     

      


  • Bill Nygren Comments on Visa

     A position in Visa (V) was started after we gained greater confidence in new management and the shares became as attractively valued as Mastercard (MA).


     

      


  • Bill Nygren Fourth Quarter 2013 Oakmark Funds Commentary

    The Oakmark Fund increased 12% during the fourth quarter, bringing the gain for the calendar year to 37%.  These robust results outpaced strong gains for the S&P 500 Index, which was up 11% for the quarter and up 32% for the calendar year.  We are happy to report that the Oakmark Fund has outperformed the S&P 500 in three of the past four quarters.  And for the calendar year, 41 of the Oakmark Fund’s holdings gained more than 30%, and the Fund ended the year at new high levels.  We are very pleased with these strong results, but we continue to remind shareholders that these gains are well ahead of historical averages.  Although stocks aren’t as cheap as they were a year ago, equity valuations are still near long-term average levels, so we expect broad market returns to also revert to more “normal” levels. 


    Our portfolio has been heavily invested in financial services, economically sensitive industrials and information technology.  These three segments of the S&P 500 were among the best performers in the fourth quarter.  We think our holdings in these areas remain attractively valued, and investments in these three segments account for almost 60% of the Fund’s assets as well as most of our incremental purchases during the fourth quarter.  In addition to the initiation of new positions in Visa and Union Pacific Corporation (see below), our largest purchases during the quarter were in shares of Qualcomm, Aon and Intel.  A position in Visa (V) was started after we gained greater confidence in new management and the shares became as attractively valued as Mastercard (MA).

      


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