Bill Nygren

Bill Nygren

Last Update: 05-27-2016

Number of Stocks: 51
Number of New Stocks: 0

Total Value: $14,854 Mil
Q/Q Turnover: 2%

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

Bill Nygren Watch

  • David Herro and Bill Nygren Comments on Credit Suisse

    Credit Suisse (NYSE:CS), one of Switzerland’s top financial services groups, was the largest detractor from performance for the quarter, declining 22%. Although the U.K.’s decision to leave the EU has negatively impacted Credit Suisse Group’s share price, it is important to remember that the bank derives only 2% of its revenues from the U.K., while 13% of its costs are denominated in pound sterling currency, the net result of which may be somewhat positive for profitability. While the decision to leave the EU has caused notable market upheaval, global market declines were actually more extreme in the first few months of 2016 due to significant commodity price weakness, concerns regarding slowed economic growth in the U.S. and China, and monetary decisions by major central banks. Even so, Credit Suisse was able to grow net new money by 6.1% in the first quarter, which was meaningfully better than the 3.8% we estimated for the full fiscal year and higher than our expected normal run-rate of 5%. Additionally, we believe its overall first quarter results were good. Performance in its investment bank division lagged behind the industry, however we recognize that the underperformance is partially due to restructuring activity and we expect performance to improve when restructuring is complete. Also during the first quarter, Credit Suisse realized about half of its intended CHF 1.4 billion in cost cuts, which was ahead of schedule. Although the company’s near-term results may suffer, it is too early to know the extent to which the U.K.’s EU exit will affect Credit Suisse. The company reports its second-quarter financial results in late July, at which time we’ll have a clearer view.

    From David Herro (Trades, Portfolio) and Bill Nygren (Trades, Portfolio)'s Oakmark Global Select Fund second quarter 2016 commentary.   


  • David Herro and Bill Nygren Comments on Apache

    The largest contributor to performance for the quarter was Apache (NYSE:APA) (U.S.), a global oil and gas exploration company, which returned 14%. In addition to higher oil prices, Apache benefitted from solid first quarter results that demonstrated better production at lower costs. The results also showed that Apache continues to reduce its capital intensity with North American well costs down 45% since 2014 due to service prices and efficiencies. In our view, Apache has the balance sheet and asset quality to survive continued volatility in oil and gas prices, and we like how the management team is preserving and growing per share value. One of the reasons we purchased Apache last year was our confidence in the newly appointed CEO, John Christmann. He acted quickly, replacing the operating heads of each region and changing compensation metrics to focus on return, better aligning management with the shareholders. We continue to believe that Apache is inexpensive relative to the value of its properties.


    From David Herro (Trades, Portfolio) and Bill Nygren's Oakmark Global Select Fund second quarter 2016 commentary.

      


  • Nygren and Herro's Oakmark Global Select Fund 2nd Quarter Commentary

    The Oakmark Global Select Fund declined 4% for the quarter ended June 30, 2016, underperforming the MSCI World Index, which returned 1% for the quarter. The Fund has returned an average of 7% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 4% over the same period.


    The United Kingdom’s vote to exit the European Union caused extreme reaction in the global financial markets. Please see the International lead letter for more information on this topic.

      


  • Bill Nygren Comments on Chesapeake

    Earlier in 2016, investors were pricing in significant bankruptcy risk across Chesapeake (NYSE:CHK)’s capital structure. At the time, we believed Chesapeake’s liquidity risks were manageable given the company’s ability to sell assets representing a small percentage of its future production in exchange for cash, making up a meaningful percentage of the company’s enterprise value. We felt that Chesapeake’s bonds at the time had a similar upside to the stock and had the added benefit of higher seniority in the capital structure, so we swapped the preponderance of our Chesapeake equity position into the company’s fixed income securities. On average over the months in which we executed this trade, we sold CHK stock for approximately $4 per share and bought bonds trading for $48.


    Commodity prices rose during the quarter, while Chesapeake sold assets for cash without substantially reducing its current EBITDA. We believe that the liquidity profile of the company is now considerably improved. Today the bonds are trading for $85 while the stock is at $4.28, and the relative attractiveness of Chesapeake bonds to its stock has noticeably narrowed. We are very impressed with how well Chesapeake’s management team and board of directors have navigated this challenging commodity price environment, and we remain positive about the long-term prospects for this company.

      


  • Bill Nygren Comments on Harley-Davidson

    During the quarter we added two new positions to the Fund, Harley-Davidson and the aforementioned LinkedIn. Harley-Davidson (NYSE:HOG) is one of America’s great brands, yet at 11x 2016 earnings per share, it is priced as if it’s a distressed retailer. The company’s new CEO has increased product development and marketing spending, seeking to provide long-term benefits at the expense of current margins, and is expanding into markets such as China, India and Vietnam with encouraging early results. A pervasive concern cited about Harley-Davidson is the aging of its core Baby Boomer rider base, but motorcycle ownership amongst people ages 25-50 today is as high per capita as it was when Boomers were in that demographic. We believe the long-term future of this company is bright and that the current price of the stock will prove a bargain.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund second quarter 2016 commentary.   


  • Bill Nygren Comments on LinkedIn

    We initiated a position in LinkedIn, the world’s leading professional social network, after the stock declined precipitously in reaction to weaker-than-expected full-year revenue guidance. In our view, the sell-off in LinkedIn’s stock, in which it shed nearly half of its value in one day, was a severe over-reaction when measured against the company’s strong long-term growth potential, its unrivaled competitive position and the attractive economics of its core Software as a Service (SaaS) offerings. Powered by network effects as well as the quality and breadth of its member data, LinkedIn pioneered the concept of “passive recruiting” at a previously unattainable scale, drawing from its approximately 430 million members. In doing so, LinkedIn created a unique, highly profitable subscription-based suite of services that enables corporations to search and communicate with talent, post jobs and market their own enterprises. At our initial purchase price, LinkedIn (NYSE:LNKD) appeared substantially undervalued relative to other business service and Internet companies on an enterprise value-to-sales ratio. However, the high margins of its core employment services business were being masked by heavy investment spending in earlier stage adjacent businesses, which drastically reduced its reported earnings. In our assessment, we were able to purchase LinkedIn’s still rapidly growing core business at a highly discounted valuation while essentially treating the other investments as cheap call options. On June 13, Microsoft (NASDAQ:MSFT) announced an agreement to acquire LinkedIn for $196 per share, a price that is consistent with our thesis and estimate of fair value. While it’s unusual for one of our holdings to reach our estimate of fair value so quickly after purchase, we’re obviously pleased when a strategic buyer sees the same value that we do.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund second quarter 2016 commentary.   


  • Bill Nygren's 2nd Quarter Oakmark Select Fund Commentary

    The Oakmark Select Fund was up 3% for the quarter, ahead of the S&P 500’s 2% return. Three quarters into our fiscal 2016, the Oakmark Select Fund increased by 4% compared to an 11% gain for the S&P 500.


    Our best performers in the quarter, both up more than 60%, were LinkedIn and Chesapeake Energy (NYSE:CHK) bonds. Our biggest detractors to performance were Fiat (NYSE:FCAM) convertible bonds, down 18%, and Alphabet (NASDAQ:GOOGL), down 7%; we continue to believe both companies trade at significant discounts to their intrinsic values. From a sector-weight standpoint, our large position in technology stocks hurt returns this quarter, as did our underweight position in health care. The details of our LinkedIn investment are discussed elsewhere in the Oakmark Fund and Oakmark Global Fund letters this quarter; suffice it to say that take-outs of our portfolio companies at close to fair value are always welcome. The Chesapeake Energy position, however, deserves a more comprehensive discussion.

      


  • Bill Nygren's Oakmark Fund: 2nd Quarter 2016

    The Oakmark Fund increased 1% in the second quarter of 2016, lagging behind the 2% gain for the S&P 500 Index. News of the U.K.’s decision to leave the European Union, known as Brexit, brought substantial volatility late in the quarter, and our financial holdings were pressured by fears of slower global growth and stubbornly low interest rates. At Oakmark, we evaluate businesses by summing the present value of their future cash flows, which we believe will only be minimally affected by the Brexit. We view this vote as a short-term dislocation that could actually provide buying opportunities for patient, long-term investors. Although our financial holdings were hurt toward the end of the quarter, we continue to think these are among the most attractive names in the Oakmark portfolio. Large financial institutions are in much better shape now than they were during the financial crisis of 2008-2009. We believe they are better capitalized and that most have developed a leaner cost structure and lower risk profile. On a more positive note, energy commodity prices increased significantly during the quarter, and our energy holdings benefited from this favorable pricing trend.


    Our biggest contributing sectors were energy and health care, and our worst contributing sectors were consumer discretionary and industrials. Our top individual contributors were LinkedIn, Halliburton (NYSE:HAL) and Apache (NYSE:APA), and our worst contributing securities were Fiat Chrysler (NYSE:FCAM), Apple (NASDAQ:AAPL) and State Street (NYSE:STT). LinkedIn was a new holding for the Fund in the second quarter, so we’ve included a brief summary below. We eliminated our position in Franklin Resources (NYSE:BEN) during the second quarter following a reduction in our estimate of its intrinsic value, which made the stock less attractive than other alternatives. The decline in intrinsic value was related to product-specific performance issues, as well as a reduction in our outlook for active-management asset flows.

      


  • Bill Nygren's 2nd Quarter Market Commentary

    Shortly after I moved to Chicago, a good friend introduced me to Earl the ticket broker. Having grown up in Minnesota, I didn’t even know what a ticket broker was. If you wanted to attend an event, you bought tickets from the box office far in advance. And you paid face value. But that wasn’t very effective for an analyst in the investment management industry, given the long and unpredictable hours. It was pointless to buy tickets months in advance and then miss the event because I had to work late. I often found out if an evening would be free only a day in advance. Of course by then, all the popular events were sold out.


    That’s where Earl came in. He knew who had tickets and who was willing to sell them. Earl could get tickets to anything. And I gladly paid his premium price so that the few events I attended could be the ones I was most interested in. Earl had proprietary knowledge and was able to earn a good living from it.

      


  • Alphabet and Bank Stocks Lead Buying List for Bill Nygren

    As the market has fallen following the United Kingdom’s vote to exit the European Union, investors are becoming fearful of what may be in store and where to invest in the current market environment. While the U.K. is not shutting down, its new negotiation of trade agreements will challenge its own trade balance, allow for other countries to take a stronger lead and weaken its currency.


    Since Friday’s U.K. exit announcement, the leading U.S. indexes have fallen about 2.5% while the FTSE 250 is down 7.61%. Stocks in Europe could fall farther; however, it seems the U.S. is recovering with the drop in U.S. stock valuations primarily a factor of surprise. Although the leading indexes have lost approximately 2.5% since Friday, they were up nearly 2% in the four trading days prior to the U.K. exit vote.

      


  • Oil Update: Are Bargains Still Out There? - Harris Associates

    Judson Brooks is a partner and U.S. investment analyst at Harris Associates. Prior to joining Harris Associates in 2001, Judson was a research analyst at Ariel Capital Management. He has an MBA from the University of Chicago and a BA from Indiana University. Judson is a CFA charterholder.


    May 18, 2016

      


  • Brexit Threat and Long-Term Investors: Most Discounted Financials

    Many economists and international organizations have opined on the potential dangers of a British decision to leave the EU next week, but its jarring impact on the market may have a different meaning for long-term investors. Already it has helped put many banks on sale.


    Firms in the UK’s financial sector “would likely incur a setback to their earnings and economic disruption,” if a majority of British citizens vote yes on a June 23 referendum to decide whether to leave the EU, Sarah Ketterer (Trades, Portfolio) of Causeway Capital has said. Fear of the Brexit fallout has already hit the country’s financial sector, dropping it 29.9% in the recent year, the third most precipitous sector decline in the FTSE.

      


  • Gurus Who Bought LinkedIn Cheap in 2nd Quarter See Big Gains

    The Microsoft-LinkedIn deal this week conferred some much needed mercy on funds this quarter, if they owned LinkedIn (NYSE:LNKD) stock.


    Oakmark Funds, for instance, had such a sharp uptick in its return June 13, the day Microsoft announced its plan to acquire LinkedIn, it sent a note to clients to explain. Its stake in LinkedIn was a surprise to investors because the firm started the position in the second quarter before the SEC-required disclosure date. The stock’s spike to $196 the day of the announcement from $131 the day prior gave an unusually quick profit for the long-term focused fund.

      


  • Oakmark Fund Celebrates LinkedIn-Related Jump

    From the Oakmark Fund, led by Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio):   


  • Bill Nygren of Oak Mark Fund Invests in Citigroup and Ally Financial

    During the first quarter, Bill Nygren (Trades, Portfolio) of Oak Mark Fund increased his position in Ally Financial Inc. (NYSE:ALLY) by 49.90%, ending with 15,674,000 shares of the stock.


    Usually, the Oak Mark Fund portfolio manager uses multiple methods to calculate the proper intrinsic value for the stock. According to his first-quarter commentary, Nygren wants to apply the valuation metrics that most accurately capture the intrinsic value. For example, Nygren valued Amazon (NASDAQ:AMZN), one of his largest holdings last year, using EV/Sales multiples, the valuation multiple that gives Nygren confidence that Amazon was cheap compared to its competitors. For Alphabet Inc. (NASDAQ:GOOGL), Nygren used a more complicated approach to value the company: a “sum-of-the-parts” approach that explicitly valued cash and cumulative investments in venture caplike projects.

      


  • Bill Nygren Adds Stake in Fiat Chrysler Automobiles

    Bill Nygren (Trades, Portfolio) increased his stake in Fiat Chrysler Automobiles NV (FIATY) during the first quarter.


    Fiat Chrysler Automobiles is the seventh-largest automaker in the world. It designs, engineers, manufactures and sells passenger cars, light commercial vehicles, components, and production systems worldwide. The group’s automotive brands are Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, SRT and Maserati, in addition to Mopar, the parts and service brand.

      


  • Bill Nygren Gets Better Than Fair Value for 3 Stakes

    Bill Nygren (Trades, Portfolio) of Oakmark Fund sold more stakes in the first quarter – five – than he had in more than a year. In all but two of those transactions, he sold the shares for well in excess of their fair values.


    Nygren’s most noteworthy transaction in the first quarter was the sale of his 4.8 million-share stake in American Express Co. (NYSE:AXP), a banking and financial services company based in New York City, for an average price of $58.34 per share. The divestiture had a -2.06% impact on Nygren’s portfolio.

      


  • Carlson Reduces Holdings in Monsanto and eBay in 1st Quarter

    The top two transactions in the first-quarter portfolio of David Carlson (Trades, Portfolio) of Elfun Trusts were large stake reductions – one in a biotechnology company, the other in an ecommerce company.

    Carlson trimmed his stake in Monsanto Co. (NYSE:MON), a St. Louis-based agricultural biotechnology company, by nearly 78% with the sale of 560,000 shares for an average price of $90.35 per share. The transaction had a -2.39% impact on Carlson’s portfolio.  


  • Low PS for Caterpillar, L-3, Advanced Auto Parts

    According to GuruFocus' All-in-One Screener, the following are companies with market caps above $5 billion that are trading with low P/S ratios.


    Caterpillar Inc. (CAT) is trading at about $72 with a P/S ratio of 1.01 and an estimated P/E multiple of 34.66. The company has a market cap of $42.29 billion; over the last 10 years, the stock has dropped by 7%. During the last 52 weeks, the price has been as high as $89.62 and as low as $56.36.

      


  • Fiat Chrysler Recalls Vehicles Over Transmission Problems

    London-based Fiat Chrysler Automobiles (NYSE:FCAU), the seventh-largest automaker in the world, announced Friday that it would recall more than 1 million vehicles because they can roll abruptly and, as a result, cause damage and/or injuries if the transmission is being used incorrectly.


    The recall was issued after a reported 41 injuries were connected to problems with the automatic gearshifts. The gearshift indicator has been redesigned for all models.

      


  • Financial Stocks’ Weakness Attractive to Oakmark’s Nygren – Top Picks

    In search of a great unloved sector, Oakmark Funds’ Bill Nygren (Trades, Portfolio) vouched for financial stocks in 2016. He had 18 in this portfolio at the end of the fourth quarter, and in spite of their downward slide this year he hasn’t changed his mind.


    Financial stocks have come in dead last in S&P sector performance year to date, falling 7.3% and trailing the S&P 500 stock index’s 0.10% decline. Some of the industry’s bellwethers to tumble this year were Bank of America (NYSE:BAC), down 21%; JPMorgan (NYSE:JPM), down 10%; and Citigroup (NYSE:C), down 19%. Nygren saw the falter as primarily a combination of two factors.

      


  • Oakmark Fund Sells General Mills, American Express, Chesapeake Energy

    Before filing his complete portfolio update not due for several weeks, Bill Nygren (Trades, Portfolio) in his first quarter letter from Friday disclosed some highlights of his fund’s activity, including the end of four positions.


    Nygren, portfolio manager of the Oakmark Fund, sold all of his shares in General Mills (NYSE:GIS), American Express (NYSE:AXP), Union Pacific (NYSE:UNP) and Chesapeake Energy (NYSE:CHK). He did not add any new positions during the first quarter of 2016.

      


  • Bill Nygren, David Herro Comment on Credit Suisse

    Credit Suisse (NYSE:CS) (Switzerland) was the largest detractor for the quarter, declining by 34%. Although CEO Tidjane Thiam warned that fourth-quarter earnings would be weak, some one-off expenses related to litigation, pension true-up charges and write-downs on certain credit assets were negative surprises during the period. However, this has caused the management team to accelerate the restructuring and reduction of non-core investment banking lines of businesses. The goal is to emphasize the wealth management business that has very good secular growth trends, is fee based and requires little capital. We believe Credit Suisse’s capital position remains solid with a Tier 1 capital ratio of 11.4% as of year-end, which is in excess of regulators’ 10% requirement. Despite some near-term challenges, we continue to believe that over time shareholders will benefit from CEO Thiam’s initiatives to correct some legacy missteps, grow the business and reduce costs.


    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund: First Quarter 2016 Commentary​.

      


  • Bill Nygren, David Herro Comment on Oracle

    The largest contributor to performance for the quarter was Oracle (NYSE:ORCL) (U.S.), which returned 12%. Shares reacted positively to stronger-than-expected fiscal third quarter results from the cloud-based business. We believe Oracle’s successful transition to the cloud indicates that the company is on the right track. Management also recently announced a $10 billion increase to Oracle’s existing share repurchase program. Even though its stock has enjoyed recent price increases, we believe Oracle remains undervalued relative to its normalized earnings power.


    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund: First Quarter 2016 Commentary​.

      


  • Bill Nygren Comments on Fiat Chrysler

    Similarly, we have increased our position in Fiat Chrysler (NYSE:FCAM) mandatory convertible bonds at prices that preserved the upside of the equity with the added benefit of downside protection through a unique conversion feature, purchased at minimal additional cost, while capturing a tax loss as we sold a corresponding dollar amount of Fiat Chrysler equity. In January, we also sold Ferrari shares upon distribution from Fiat Chrysler because the shares were near our estimate of intrinsic value. We used the proceeds to purchase a like dollar amount of Fiat Chrysler shares, which were selling at a much larger discount to our estimate of value.

      


  • Bill Nygren Comments on Chesapeake Energy

    While there were no new companies purchased in the quarter, recent volatility in the equity and fixed income markets allowed us to purchase securities within the capital structure of two existing holdings in a way that maintained upside to these undervalued companies and added downside protection, while also providing a tax benefit. In the case of Chesapeake Energy (NYSE:CHK), we purchased bonds at prices that offered similar upside to the equity, despite higher seniority in the capital structure, while capturing a tax loss on the sale of equity.

      


  • Bill Nygren Comments on Chesapeake Energy

    When a business doesn’t meet our expectations, we reduce our intrinsic value estimate accordingly, and the remaining three eliminations fall into that category. Selling our positions in American Express, Union Pacific and Chesapeake Energy allowed us to take tax losses while reinvesting proceeds into businesses in which we have more long-term confidence. Specifically, Chesapeake Energy (NYSE:CHK) has been a poor performer as oil prices have dropped from over $100 per barrel to less than $40 per barrel. Therefore, we swapped our Chesapeake holdings for other energy holdings that are also undervalued based on expected cost-cutting and higher commodity prices, but have what we believe are stronger balance sheets.

      


  • Bill Nygren Comments on General Mills

    General Mills (NYSE:GIS) has provided favorable returns since we added the stock in early 2014, and we sold our position as the share price approached our estimate of intrinsic value.

      


  • Bill Nygren and David Herro's Oakmark Global Select Fund: First Quarter 2016 Commentary

    The Oakmark Global Select Fund declined 4% for the quarter ended March 31, 2016, underperforming the MSCI World Index, which was flat for the quarter. The Fund has returned an average of 7% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 4% over the same period.


    The largest contributor to performance for the quarter was Oracle (NYSE:ORCL) (U.S.), which returned 12%. Shares reacted positively to stronger-than-expected fiscal third quarter results from the cloud-based business. We believe Oracle’s successful transition to the cloud indicates that the company is on the right track. Management also recently announced a $10 billion increase to Oracle’s existing share repurchase program. Even though its stock has enjoyed recent price increases, we believe Oracle remains undervalued relative to its normalized earnings power.

      


  • Bill Nygren's Oakmark Select Fund: First Quarter 2016 Commentary

    For the quarter, the Oakmark Select Fund declined 6%, compared to a 1% gain in the S&P 500 Index. Our financial sector holdings accounted for over 80% of the decline in the Fund this quarter. While we are disappointed with this outcome, we remain confident in our financial holdings and the same process that has delivered success since the Fund’s inception.


    The three largest detractors from performance were Bank of America (-19%), Citigroup (-19%) and American International Group (-12%). Concerns about the economy and lower near-term expectations for interest rates have pressured financial stock prices broadly, and our holdings were not immune. Importantly, our values already reflect normalized credit losses and relatively minor interest rate increases over the next two years. While stresses in the energy and mining sectors will likely lead to some related credit losses for the banks, we believe the impact to value will prove de minimis as exposures are relatively small across our holdings. Meanwhile, operational performance and capital allocation are tracking with our expectations. Therefore, we view the lower share prices as merely increasing the discount to value at which these already cheap financials were trading, and we remain very confident in these holdings. The management and directors of Bank of America, Citigroup and JP Morgan seem to agree as they personally bought an aggregate $31.5 million of their companies’ stock during the first quarter.

      


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