The Oakmark Fund declined 1% in the first quarter of 2015, and it lagged behind the 1% gain for the S&P 500. Falling oil prices and the strengthening U.S. dollar captured investor attention and brought heightened volatility to company earnings and stock prices during the first quarter. With interest rates near multi-year lows, however, we feel that equities remain the most attractive asset class. We remain confident in the Oakmark Fund’s long-term prospects, and our confidence is supported by the fact that a substantial portion of the recent underperformance has been driven by weakness in the financials sector, which is among the highest potential return sectors of the Fund.
The sectors that contributed the most to performance were consumer discretionary and healthcare, driven largely by Amazon (AMZN) and UnitedHealth Group (UNH), respectively. Amazon (AMZN) was up 20% after reporting stronger than expected revenue growth in the fourth quarter, and the company continues to invest heavily to support high-return future growth. UnitedHealth Group (UNH) was up 17% due to strong fourth quarter results and continued momentum as concerns about healthcare reform wane. Our weakest sectors were financials and energy, and Bank of America (BAC) and Chesapeake Energy (CHK) were the worst performing securities. Despite the near-term weakness, we feel the financials and energy sectors remain undervalued, and the Oakmark Fund added to several positions in these sectors during the quarter. Continue Reading »