The Oakmark Fund returned 5% during the fourth quarter of 2015, bringing the calendar year to a loss of 4%. These results lagged behind the S&P 500, which was up 7% for the fourth quarter and up 1% for the calendar year. We are disappointed with the Fund’s full-year results, which were hurt by significant declines in energy-related shares and relative underperformance from financials. As portfolio managers and large shareholders of the Fund, we’re not satisfied with losses, but we remain confident in our time-tested philosophy, investment process and our research team. As we have said in the past, our analysts look for three characteristics in every investment: (1) businesses selling at a discount to fair value, (2) businesses that produce sustainable value growth over time and (3) management teams that think and act like value-maximizing owners. We typically buy businesses that are trading at a significant discount to our estimate of a company’s intrinsic value and sell when the price approaches intrinsic value. With recent underperformance in several of our sectors, the valuation of the Oakmark Fund portfolio is attractively positioned toward the “buy” end of the range.
Our biggest contributing sectors for the fourth quarter were information technology and financials, with General Electric and Amazon being the best individual contributors. Our worst contributing sectors for the quarter were energy and healthcare, and our worst individual securities were Anadarko and Cummins. For the calendar year, the highest contributing securities were Amazon and Alphabet (formerly known as Google), and the worst contributing securities were Chesapeake and Qualcomm. Chesapeake (NYSE:CHK) was affected by another 30% drop in crude oil prices in 2015, to what we feel is an unsustainable level, and Qualcomm (NASDAQ:QCOM) was pressured by foreign disputes in their highly profitable wireless royalty business. Continue Reading »