Bill Nygren

Bill Nygren

Last Update: 03-01-2017

Number of Stocks: 49
Number of New Stocks: 4

Total Value: $15,212 Mil
Q/Q Turnover: 9%

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

Bill Nygren Watch

  • Bill Nygren Sells Bank of America, T. Rowe Price, Goldman Sachs

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. During the fourth quarter the guru sold shares in the following stocks:


    He closed his stake in Principal Financial Group Inc. (PFG) with an impact of -2.02% on the portfolio.

      


  • Oakmark: Sacrificing the Short Term for the Long Term

    Eric Liu is a Portfolio Manager and Senior International Investment Analyst at Harris Associates. Prior to joining Harris Associates in 2009, Eric was a Research Associate at Dodge & Cox and an Investment Banking Analyst at Jefferies & Company. He received an MBA from the University of Chicago and a BA from the University of California Los Angeles.


    2016 was an unusually volatile year for global equity markets and our strategies. The beginning of the year was marked by a sharp sell-off in global equities due to growth concerns in China, the devaluation of the yuan and falling commodity prices. At one point during the first quarter, the Oakmark International Fund was down over 16%. Markets then recovered from their February lows, but this was short lived as Britain voted to exit the European Union in late June, which led to uncertainty across global markets and another sell off of equities. At the end of the year's first fiscal half, the Oakmark International Fund was down over 10%. Through this downward volatility, we did not waiver and instead used it as an opportunity to initiate new positions in companies that we viewed as undervalued and further build up stakes in our most underappreciated holdings.

      


  • Herro and Nygren Comment on Ingenico Group

    During the quarter, we initiated one new position in France-based Ingenico Group (XPAR:ING), a global leader in secure electronic payment solutions. The company provides products and services that include point-of-sale payment terminals, payment software and mobile e-payment solutions. We eliminated our positions in China ZhengTong Auto Services (China) and Ichiyoshi Securities (Japan) during the quarter. Also in December, the acquisition of gategroup (Switzerland) by Chinese conglomerate HNA Group was completed.

      


  • Herro and Nygren Comment on Incitec Pivot

    A top-performing stock for the quarter was Incitec Pivot (ASX:ISL), an Australian manufacturer of mining explosives, fertilizers and industrial chemicals. Incitec Pivot’s share price reacted favorably following the company’s fiscal year earnings report that was released in early November. Overall, these results were in line with our estimates and represent what we believe is solid performance in the face of significant macro headwinds across Incitec's businesses. We met with management in December, and found that their efforts to reduce costs during 2016 were substantive and helped counter tough market conditions that significantly affected their earnings, such as steep price declines for fertilizers. Overall, the company expects its markets to remain challenging in 2017. However, management is on track to deliver additional cost savings to help combat this, and certain markets seem to be improving, including the mining explosives and urea markets. In addition, the company is now in position to harvest the benefits of a period of significant capital investment. Even with the recent share price advance, we believe Incitec Pivot is trading at a substantial discount to the company’s true worth.

      


  • Herro and Nygren Comment on Citigroup

    Citigroup (NYSE:C)’s global franchise gives it a unique advantage because it has more than twice as many country banking licenses as its closest competitor. This unique global reach is an attractive asset and difficult to replicate in today’s regulatory environment. We believe Citigroup has substantial excess capital, which—combined with its significant deferred tax assets—should give the management team many opportunities to increase shareholder value.

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


  • Herro and Nygren Comment on Lloyds

    We have been following Lloyds (NYSE:LYG) for some time, and the U.K.’s recent decision to withdraw from the European Union translated to a decline in Lloyds’ share price. In our estimation, this price drop greatly exceeded any actual loss of intrinsic value of the company, and we believe Lloyds is undervalued relative to its normalized earnings power.

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


  • Herro and Nygren Comment on Danone

    Danone (XPAR:DN), one of the largest dairy food producers and bottled water suppliers in the world, was the largest detractor for the quarter, declining 14%. Danone’s third-quarter results were weaker than expected given continued destocking in both its Waters and Early Life Nutrition segments. The Waters division is suffering from oversupply as growth normalizes in China. Early Life Nutrition has been hurt by regulatory changes in China since distribution is shifting from indirect to direct. We believe both divisions will continue to be weak in the short term. Additionally, Danone is in the process of acquiring WhiteWave, a U.S.-based dairy food producer, and investors reacted negatively to WhiteWave’s third-quarter results, which fell short of expectations. We continue to believe the strategic rationale behind the WhiteWave acquisition is sound. It will enable Danone to integrate fast-growing brands and gain leverage with retailers, which should lead to improved competitive positioning. In December, Danone amended fiscal-year guidance by lowering organic growth but increasing operating margins. The organic growth shortfall is due to weakness in its European Fresh Dairy division, attributed to a shortfall in the Activia relaunch. Management believes a more tailored approach on a country-by-country basis should remedy the shortfall. Although Danone faces some near-term headwinds, we believe it remains an attractive investment for our shareholders.

      


  • Herro and Nygren Comment on Bank of America

    Bank of America (NYSE:BAC), one of the biggest U.S. banks, was the largest contributor to performance for the quarter, returning 42%. Bank of America’s share price reacted positively to third-quarter results that showed strong capital market performance and healthy loan and deposit growth. The election of Donald Trump further boosted Bank of America’s stock price amid investors’ expectations that a Trump administration would lead to less regulation. Additionally, the president-elect has promised to boost economic growth, which should allow for interest rates to return to more normalized levels and benefit companies in the financials sector. We believe an improving interest rate environment, along with additional expense reductions and continued share repurchases, will drive strong EPS growth over the next several years. At its current price, we believe Bank of America remains undervalued.

      


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

    The Oakmark Global Select Fund returned 7% for the quarter ended December 31, 2016, outperforming the MSCI World Index’s 2% return. For the calendar year, the Fund returned 10%, outperforming the MSCI World Index’s return of 8%. The Fund has returned an average of 8% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 5% over the same period.


    Bank of America (NYSE:BAC), one of the biggest U.S. banks, was the largest contributor to performance for the quarter, returning 42%. Bank of America’s share price reacted positively to third-quarter results that showed strong capital market performance and healthy loan and deposit growth. The election of Donald Trump further boosted Bank of America’s stock price amid investors’ expectations that a Trump administration would lead to less regulation. Additionally, the president-elect has promised to boost economic growth, which should allow for interest rates to return to more normalized levels and benefit companies in the financials sector. We believe an improving interest rate environment, along with additional expense reductions and continued share repurchases, will drive strong EPS growth over the next several years. At its current price, we believe Bank of America remains undervalued.

      


  • Bill Nygren Comments on Ally Financial

    We continue to believe that financial stocks are quite undervalued as well. During the quarter we made a new investment in Ally Financial (NYSE:ALLY). Ally was founded nearly a century ago as General Motors Acceptance Corporation. Its purpose then was to provide financing to GM dealers and retail customers. Today, Ally is no longer owned by GM. It serves a wide variety of dealers (including Ford, Chrysler and Toyota), and it is carefully building a consumer franchise. In our view, investors are myopically concerned that the auto business is at a cyclical peak. U.S. auto sales are near record levels, and credit losses are below long-term averages. Some believe Ally’s earnings have nowhere to go but down. We believe cyclical pressures will be more than offset by continued internal improvements, such as funding cost reductions (low-cost online deposits grew 19% in the third quarter of 2016) and improving the capital structure. With Ally’s stock trading at roughly 68% of tangible book value, we believe Ally is a compelling addition to the Oakmark Select Fund. We didn’t eliminate any positions during the quarter and exit 2016 with 20 investments in the portfolio.

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


  • Bill Nygren Comments on HCA

    HCA (NYSE:HCA) is the largest operator of for-profit hospitals and related health care services in the U.S. The company benefits from scale and size advantages, an attractive geographic footprint in higher growth markets, best-in-class management and governance, and an equity-friendly approach to capital allocation. We expect HCA to grow operating income in the mid-single digits and grow EPS in the low-double digits over time. Hospital stocks sold off following the presidential election due to concerns that the benefits from health care reform will be lost. We believe that HCA’s share price discounts the effects of repealing the Affordable Care Act. Accordingly, the shares are selling below our estimate of intrinsic value.

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


  • Bill Nygren Comments on Baxter

    Baxter (NYSE:BAX) is a collection of disparate health care businesses, which include dialysis consumables, intravenous solutions and surgical sealants. These businesses represent what was left at Baxter following the spinoff of Baxalta in mid-2015. The businesses hadn’t been run optimally, and at the time of the spin were only producing 9% margins, which represents less than half of the levels we believe to be achievable. Baxter hired outsider Jose Almeida as CEO in late 2015. Oakmark Fund shareholders might fondly remember Almeida from his successful tenure as CEO of our long-time holding Covidien, where he fixed (and eventually sold) a collection of health care assets that had been spun out from Tyco International. We believe Almeida has the right skill set to improve Baxter’s margins and portfolio of assets, and that the company is selling at a large discount to intrinsic value.

      


  • Bill Nygren Comments on AutoNation

    AutoNation (NYSE:AN) is the largest automotive retailer in the U.S. The company owns and operates 371 new vehicle franchises through 261 stores, located predominantly in major metropolitan markets. The stock was down 18% in 2016 because investors were disappointed by the company’s earnings and were fearful that the auto cycle had reached its peak. The soft earnings were caused by brand-building investments, disruptions from a Takata airbag recall and poor performance in Texas. We are confident that these are short-term setbacks and that AutoNation will be able to rebound. In our view, the brand and franchise remain strong, and the company’s CEO, Mike Jackson, is a proven operator and superb capital allocator. Since Jackson became CEO in 1999, he has opportunistically used share repurchases to reduce the share base by 75%, contributing to a total return to shareholders of 346% (versus 144% for the S&P 500). We believe that paying 11x depressed earnings for an industry leader with such a strong track record is a compelling investment.

      


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

    The Oakmark Select Fund increased 10% for the quarter, compared to 4% for the S&P 500 Index. For all of calendar 2016, the Fund increased 15%, compared to a 12% gain for the S&P 500 Index. We’re happy to highlight that the Fund hit a new all-time high adjusted NAV this quarter.


    As you can see from those numbers, more than all of our 2016 outperformance came from the strong fourth calendar quarter. As always, we invest the Fund’s assets where we believe the market is presenting the most compellingly valued opportunities, and thus were 32% weighted in financials and 0% weighted in health care and consumer staples at the start of the fourth quarter. Although those weightings were responsible for some of the Fund’s relative underperformance throughout most of 2016, these sector weights proved hugely beneficial in the most recent quarter, producing over 450 basis points of relative performance versus the S&P 500 Index. Our top individual performers for the quarter, each up by at least 20%, were Fiat Chrysler (up 40%) and four financial companies (led by Bank of America, up 42%). Our biggest detractors, FNF Group and Intel (NASDAQ:INTC), were each only down single-digit percentages.

      


  • Bill Nygren's Oakmark Fund Commentary: Fourth Quarter 2016

    The Oakmark Fund returned 8% during the fourth quarter of 2016, hitting an all-time high NAV and bringing the calendar year to a gain of 18%. These strong results were ahead of the S&P 500, which was up 4% for the fourth quarter and up 12% for the calendar year. We are very pleased that recent performance showed a substantial reversal from the results reported to you following the fourth quarter of 2015. At that time, we reiterated confidence in our time-tested philosophy, investment process and research team. A big part of our process involves having the patience to wait for the gap between a company’s intrinsic value and its stock price to close. While that gap had been frustratingly large over the past couple of years, we maintained high portfolio weightings in the out-of-favor financials, information technology, and energy sectors. At the beginning of 2016, over 60% of the Fund’s equity assets were invested in these three sectors, and our long time horizon allowed us to maintain these high conviction levels throughout the year.


    Our best contributing sectors for the fourth quarter were financials and industrials. Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) were the best individual contributors, returning 42% and 49%, respectively, for the quarter, and the financials sector as a whole returned 19%. Our lowest contributing sectors for the quarter were consumer staples and health care, but our exposure to those sectors was lower than the S&P 500’s weightings. Our worst individual securities for the quarter were News Corp (NASDAQ:NWS) and Diageo (NYSE:DEO). For the calendar year, financials and information technology were the best contributing sectors, and our best individual securities were Apache (NYSE:APA) and Cummins (NYSE:CMI) (up 46% and 61%, respectively). Our lowest contributing sectors for the calendar year were consumer staples and consumer discretionary (down 1% and up 3%, respectively), and our worst contributing securities for the calendar year were Liberty Interactive QVC and Fiat Chrysler (down 27% and 22%, respectively). Liberty Interactive QVC saw some uncharacteristic product-related revenue pressure, and Fiat Chrysler faced near-term headwinds from currencies and emerging markets. During the quarter, we added new positions in AutoNation, Baxter International and HCA Holdings (see below), and we eliminated positions in Applied Materials, Principal Financial and T. Rowe Price.

      


  • Intel Gains 15% Ownership of Here International

    Intel Corp. (NASDAQ:INTC) announced on Tuesday it is acquiring a 15% stake in privately held Here International BV for an undisclosed amount.


    Here is a global provider of digital maps and location-based services located in the Netherlands. Intel is purchasing the ownership stake from the company’s current indirect shareholders, Volkswagen’s (XTER:VOW) Audi AG, BMW AG (BUD:BMW) and Daimler AG (XTER:DAI).

      


  • Bill Nygren: Investors Approaching Retirement Should Invest in More Stocks

    Bill Nygren (Trades, Portfolio), investor at the Oakmark Fund, helped investors navigate the current market, where high prices have met a president reputedly favoring economic growth policies. Nygren said that not only is it not too late for most investors to get into the market but, due to longer life spans, retirees should begin ignoring the rule of having 60% stocks and 40% bonds and allocate more to stocks.


    Because many of his holdings were the worst performer sectors earlier in the year, he is now enjoying them becoming some of the best areas of the market. Rather than attempt to time the market, Nygren said, investors should buy low-priced stocks and wait for the market to normalize.

      


  • Aon: A Stock for Risky and Uncertain Times

    Aon PLC (NYSE:AON) is an insurance brokerage company and a consulting company. When the world gets riskier, other companies turn to insurance to offload some of that risk. When the world gets more uncertain, other companies turn to consultants for advice and solutions.


    The current environment suggests these should be good times for Aon, but its share price has dipped lately. Looking at a year-to-date chart indicates this is just another blip on the upward journey of the share price, or is it?

      


  • Bill Nygren Gains MGM Resorts, Removes 3 Postions

    Bill Nygren (Trades, Portfolio), portfolio manager of the Oakmark Funds, invests in companies that trade at substantial discounts to their business value. As discussed in the fund’s prospectus, the Oakmark Select Fund seeks long-term capital appreciation based on the assumption that the company’s stock price converges to the intrinsic value over time. Nygren and his partners view each stock buy as “a piece of the business” instead of simply a stock certificate.


    The Oakmark Select Fund portfolio manager eliminated positions in LinkedIn Corp. (NYSE:LNKD), Monsanto Co. (NYSE:MON) and Fiat Chrysler Automobiles NV (NYSE:FCAU) during the third quarter. With the proceeds from these transactions, Nygren invested in 6.5 million shares of MGM Resorts International (NYSE:MGM).

      


  • Tweedy Browne Sells Halliburton, Johnson & Johnson

    Tweedy Browne is an investment partnership owned by its four managing directors, William H. Browne, John D. Spears, Thomas H. Shrager and Robert Q. Wyckoff Jr. During the third quarter the guru firm's largest sales were:


    Halliburton Co. (HAL) was reduced by 19.56% with an impact of -1.28% on the portfolio.

      


  • Bill Nygren: Joe Maddon Made the Cubs Better. Could He Do the Same for Investors?

    Bill Nygren (Trades, Portfolio) has been a manager of the Oakmark Select Fund (OAKLX) since 1996, Oakmark Fund (OAKMX) since 2000 and the Oakmark Global Select Fund (OAKWX) since 2006. He joined Harris Associates in 1983 and served as the firm's Director of Research from 1990 to 1998. He holds an M.S. in Finance from the University of Wisconsin's Applied Security Analysis Program (1981) and a B.S. in Accounting from the University of Minnesota (1980).  


  • Bill Nygren's Largest Investments of the Year

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. The following are the best performers of his investments this year.


    Applied Materials Inc. (AMAT) with a market cap of $30.37 billion has gained 53.9% year to date. The guru's stake represents 0.84% of the company's outstanding shares and 0.15% of his total assets.

      


  • Ray Dalio's Best-Performing Investments of the Year

    Ray Dalio (Trades, Portfolio) founded Greenwich, Connecticut-based hedge fund Bridgewater Associates in 1975. Now it has more than $165 billion under management. The firm claims 13% annual returns after fees.


    Dalio owns 341 stocks with a total value of $7.977 billion. The following are his best-performing investments of the year.

      


  • Bill Nygren Comments on MGM Resorts International

    We sold our remaining shares of LinkedIn (NYSE:LNKD) and established a new position in casino operator MGM Resorts International (NYSE:MGM). We believe the recovery potential in the Las Vegas market and MGM’s profit improvement plan are both underappreciated at the current value. Meanwhile, management has been busily working to close the price-value gap on the shares by monetizing latent real estate value and improving the balance sheet. In the short time we’ve owned MGM, both the fundamentals and management actions have been consistent with our thesis.

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


  • Bill Nygren Comments on Chesapeake

    Recall that earlier in 2016, we swapped most of our Chesapeake (NYSE:CHK) stock at approximately $4 per share for the company’s bonds at $48 per $100 par value, believing the bonds offered similar upside and less downside while capturing a tax loss. Last quarter we reported that the bonds had rallied to $85 per $100 par value, and the stock was trading at $4.28. Given the relative performance of the bonds to the stock and our comfort with the improved liquidity position of the company, we elected to swap back into the stock. Today our position in Chesapeake is exclusively in the form of equity.

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


  • Bill Nygren Comments on Liberty Interactive QVC

    Our largest quarterly detractor was Liberty Interactive QVC (-21%) (QVCA). After a long period of rather stable but low single-digit growth, the company announced that sales fell by a mid-to-upper single digit amount in June, and these trends continued through July. The management team cited numerous company-specific reasons for the decline and is taking action accordingly. We continue to hold our position because we believe the company’s underlying value has only been modestly affected, relative to the decline in its share price.

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


  • Bill Nygren's Oakmark Select Fund 3rd Quarter 2016 Commentary

    The Oakmark Select Fund returned 8% for the quarter, ahead of the S&P 500’s 4% return. This brings the Fund’s return for the fiscal year ended September 30, 2016 to 12%, compared to 15% for the S&P 500.


    During the quarter, our largest contributors to performance included Alphabet (+12%), Bank of America (+18%), MasterCard (+16%), and AIG (+13%). From a sector standpoint, our stock selection in Energy, as well as our selection and allocation to Financials, had the most positive impact. We also benefitted by what we didn’t own in the quarter. For some time now, we have had trouble finding value in the Consumer Staples, Utilities and Telecommunications sectors. In these sectors, we have found that share prices appear to be valued more closely to bonds, which we believe to be unattractive at current yields. Not owning these three sectors added over 1% to our performance relative to the S&P 500.

      


  • Bill Nygren and David Herro Comment on General Electric

    General Electric (NYSE:GE), a global producer of industrial, aviation and medical goods, was the biggest detractor for the quarter. While GE has benefited from improved margins and capital allocation, shares were weak during the quarter due to concerns over the company’s 2016 guidance. After producing organic growth of 1% in the first half, the company forecasts full-year organic growth between 2-4%. GE expects its Power division will drive this growth, with planned turbine shipments nearly double what they were in the first half of the year. The market appears to believe these forecasts are aggressive and expects GE management to reduce guidance when it next reports earnings. The timing of turbine shipments is essentially irrelevant to the value of the company, and our long-term investment thesis remains entirely intact.

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


  • Bill Nygren and David Herro Comment on Credit Suisse

    Credit Suisse (NYSE:CS), a Swiss financial services group, was the largest detractor from performance for the fiscal year. Credit Suisse’s share price has been weak over the past year for multiple reasons. The company’s investment banking results have struggled, although we recognize the underperformance is partially due to restructuring activity and we expect performance to strengthen once restructuring is complete. One-off expenses related to litigation, pension true-up charges and write-downs on certain credit assets also hurt performance. Additionally, the U.K.’s decision to leave the European Union negatively impacted the share price. Credit Suisse’s management has responded to these challenges with a series of restructuring measures. Its management has made progress expanding its wealth management franchise, which we believe is a good move since that business is fee based, requires little capital and has very good secular growth trends. Additionally, Credit Suisse has reduced its exposure to the global markets business, which has enabled it to de-risk its balance sheet and operate with a more efficient cost structure. Credit Suisse’s management has confirmed the restructuring of its global markets business is nearing completion and should improve profitability over the coming quarters. Credit Suisse’s common equity Tier 1 ratio of 11.8%, above the 10% minimum requirement, should increase even more on the back of higher consolidated profitability.

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


  • Bill Nygren and David Herro Comment on Apache

    The largest contributor to performance for the fiscal year was Apache (NYSE:APA), a global oil and gas exploration company, which returned 66%. Oil prices have been volatile over the past year, but have rebounded in 2016 thus far. Apache has specifically benefitted from solid quarterly results that have demonstrated improved capital efficiency, including a 45% decline in North American well costs compared to 2014 levels. The company also announced the discovery of a new resource play in the Permian Basin called “Alpine High.” Initial results indicate that Apache has discovered a high quality resource at a low cost. This increased our estimate of intrinsic value and also increased our confidence in management. 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 during the commodity price downturn.

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


  • Bill Nygren and David Herro Comment on LafargeHolcim

    LafargeHolcim (XSWX:LHN), the largest cement maker in the world, was the largest contributor to performance for the quarter, returning 30%. Shares reacted positively to news that LafargeHolcim agreed to sell Lafarge India for approximately $1.4B with proceeds going to pay down debt. We are impressed with the progress management has made on defining and implementing true synergies following the merger. Additionally, second quarter results exceeded expectations and illustrated Europe’s improving pricing environment. Management reaffirmed its 2016 outlook as well as its commitment to targets set for 2018.

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


  • Bill Nygren Comments on MGM Resorts International

    We believe there are many ways to achieve strong returns from an investment in MGM Resorts International. MGM (NYSE:MGM) is a recovery story, driven by improving supply and demand in Las Vegas where MGM has significant exposure. The company’s Profit Growth Plan, which is a cost-cutting and revenue enhancement program, should lead to higher profitability and allow for significant operating leverage once sales recover. From a longer term perspective, we believe MGM will benefit from its increasing geographic diversity, strong property development pipeline and improving capital structure. We think that valuing MGM on a property-by-property basis using cash flow multiples from recent transactions produces a much higher value than the current stock price indicates.

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


  • Bill Nygren and David Herro's Oakmark Global Select Fund 3rd Quarter Commentary

    The Oakmark Global Select Fund returned 10% for the fiscal year ended September 30, 2016, underperforming the MSCI World Index, which returned 11% for the same period. For the most recent quarter, the Fund returned 10%, outperforming the MSCI World Index, which returned 5%. The Fund has performed well versus the MSCI World Index since inception, returning on average 7% versus 4% for the benchmark.


    The largest contributor to performance for the fiscal year was Apache (NYSE:APA), a global oil and gas exploration company, which returned 66%. Oil prices have been volatile over the past year, but have rebounded in 2016 thus far. Apache has specifically benefitted from solid quarterly results that have demonstrated improved capital efficiency, including a 45% decline in North American well costs compared to 2014 levels. The company also announced the discovery of a new resource play in the Permian Basin called “Alpine High.” Initial results indicate that Apache has discovered a high quality resource at a low cost. This increased our estimate of intrinsic value and also increased our confidence in management. 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 during the commodity price downturn.

      


  • Bill Nygren 3rd Quarter Market Commentary

    “The years say what the days cannot tell.”

    -Ancient Chinese proverb

      


  • Bill Nygren's Oakmark Fund 3rd Quarter 2016 Commentary

    This quarter marks the 25th anniversary of the Oakmark Fund, and we are proud of our long-term results and pleased to mark the occasion with an all-time high adjusted NAV at quarter end. As you can see from the Growth of a $10,000 Investment chart (see chart below), a $10,000 investment in the Oakmark Fund in August 1991 has appreciated to $194,000 as of the end of this quarter, which is more than twice the appreciation level of the S&P 500 over the same time period. This represents an average annual total return of 13% for the Oakmark Fund and 9% for the S&P 500.


    We’re investing the same way today as we did 25 years ago. The Oakmark Fund’s first quarterly report in 1991 mentioned the following principles: invest in companies selling below long-term intrinsic value, take advantage of irrational and short-term investor thinking, and invest with companies that have owner-oriented management teams. We have a great team of investment analysts who use these principles to find attractive investment opportunities for the Oakmark portfolio. It is an honor to manage the Oakmark Fund, and we want to thank you for your support and confidence. We look forward to continuing this tradition for the next 25 years and beyond.

      


  • 18 Questions With Kevin Holloway

    Kevin Holloway is the owner of the Just Value blog.


    How and why did you get started investing? What is your background?

      


  • Bill Nygren Sells Franklin Resources, Monsanto and Whirlpool

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. The following are his largest second quarter sells.


    The investor exited his stake in Franklin Resources Inc. (BEN) with an impact of -1.35% on the portfolio.

      


  • Carl Icahn Gives Statement on Selling Chesapeake Energy at Loss

    Carl Icahn (Trades, Portfolio) gave up half his stake in Chesapeake Energy Corp. (NYSE:CHK) on Monday at a sizable loss.


    “We believe that over the last few years Doug Lawler and his team have done an admirable job, especially in light of the circumstances. We reduced our position to recognize a capital loss for tax planning purposes,” Icahn said in a statement.

      


  • Bill Nygren Acquires Stake in LinkedIn

    Bill Nygren (Trades, Portfolio) purchased a 1.3 million-share stake in LinkedIn (NYSE:LNKD) at an average price of $138.20 during the second quarter.


    The trade had a 1.7% impact on Nygren’s portfolio; since the purchase LinkedIn’s market price has soared gaining an estimated 39%.

      


  • Apache Announces Discovery of Oil in West Texas

    Apache Corp. (NYSE:APA), an independent energy company, announced the discovery of 2 billion to 3 billion barrels of oil in a West Texas field on Wednesday.


    The area, being referred to as “Alpine High,” is located near the Davis Mountains in Reeves County and has been previously overlooked due to the belief it would not be fit for hydraulic fracturing. According to Apache, the find could be worth at least $8 billion and has the potential to become one of the biggest energy finds of the past decade.

      


  • Bill Nygren's Top Performers

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund, and the Oakmark Global Select Fund. During the second quarter, the guru traded several stakes, the following are the ones with the highest performance since that trade.


    LinkedIn Corp Class A. (LNKD)

      


  • Bill Nygren Gains 1, Loses 1 in 2nd Quarter

    Bill Nygren (Trades, Portfolio) of Oakmark Funds acquired LinkedIn Corp. (NYSE:LNKD) and sold out of Franklin Resources Inc. (NYSE:BEN) in the second quarter.


    Nygren is the portfolio manager for the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. Nygren and his partners are value investors. They invest in companies they believe trade at a substantial discount to the true business value. When evaluating potential investments, they focus on a company’s stock price and whether it is at a discount to its value, free cash flow and the investment of excess cash. They also look for a high level of management ownership.

      


  • 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.

      


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