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Bill Nygren Joining GuruFocus for Q&A - Ask Your Questions Now

Holly LaFon

Holly LaFon

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Well-known Oakmark portfolio manager Bill Nygren is joining GuruFocus readers for a question and answer session. To ask Bill a question, simply enter it in the comment section below. We will publish his answers soon.

About Bill

Bill Nygren has been with Oakmark since 1983 and was named Morningstar’s Domestic Stock Manager of the Year for 2001. As a value-oriented firm, Oakmark seeks stocks that are selling at a substantial discount to their underlying business value, and sells holdings when the price rises to meet the value. As of the start of the year, Oakmark Fund has $9.7 billion in assets under management, and Oakmark Select Fund has $3.8 billion.

In the second quarter, Nygren’s Oakmark Fund beat the S&P 5% to 3%, and in the first half returned 15% compared to the index’s 14%. Over the longer-term – where his focus really lies – he has returned 8.13% in 10 years and 11.9% in five years.

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Bill added three new stocks to the fund in the second quarter as well: Apache Corp. (APA), General Motors (GM) and National Oilwell Varco (NOV). He also added to his Apple (AAPL).

His top holdings are Bank of America (BAC), American International Group (AIG), Capital One Financial Corp. (COF), JPMorgan Chase & Co. (JPM) and DirecTV (DTV).

See his entire long portfolio here.

Outlook

In his second quarter market commentary, Nygren talked at length about the bond market. Though the Fed’s decision to reduce its bond-buying activity caused bond prices to decline, Nygren said, he it did not change his opinion that equities are undervalued. From the letter:

“The bond market took quite a hit last quarter, but it would require another big hit before it would potentially lower our estimate of equity values. Rather than panicking about higher interest rates, we are encouraged that investors, rather than traders, are again buying bonds. And as investors regain control of the bond market, we wouldn’t be surprised to see rates continue to rise somewhat. Actually, for some of our stocks – especially the financials – we expect that their earnings will also increase as rates rise. So, we continue to believe that equities are attractively priced relative to both their own long-term history and to the opportunities available in the bond market.”

Don’t forget to add your investing questions for Bill in the comments box below. We look forward to reading them!


Rating: 3.6/5 (11 votes)

Comments

brian_flores
Brian_flores premium member - 7 months ago
Hi Bill, thanks for sharing your time and knowledge via this Q&A. I want to ask you a couple of questions:

1) How do you identify undervalued companies? How much time does it take you to transform a checklist passer into an investment reality? (ie from detecting the opportunity until it is in your portfolio)

2) Could you explain your investment logic behind NOV? What are your expectations for the oil industry in general?

Thanks for sharing your thoughts with us,

Brian
gurufocus
Gurufocus premium member - 7 months ago
Bill,

you seem to think that the market is traded at a reasonable P/E ratio. Did you consider that Earnings might be inflated by the historical high profit margins?

Hal727
Hal727 - 7 months ago
Greetings Bill,

What are your thoughts on Discover Financial Services (DFS) as a worthy investment both short term and long term?

Thank you in advance for your thoughts!!

Hal
Cas4438
Cas4438 - 7 months ago
Bill,

1.) As you've been investing for many years, your circle of competence grows and grows. What are some leading qualities of companies that finally attracts you to make a purchase? Furthermore, when you analyze a company, what are some commonalities in the way you value them? For example, you may project growth for 3 years then the company matures.

2) What are some qualitative characteristics that you look for in buying shares in a company?

3) What makes your investment management different than others?
leyamie
Leyamie - 7 months ago
Hello Bill,

Can you explain the rationale behind the large exposure (28.6%) to the financial services sector in your portfolio?
achitpatel
Achitpatel - 7 months ago
Mr. Nygren,

Many of the companies you own are heavy re-purchasers of their own stock. As companies re-purchase significant percentages of their own stock yearly (an example being IBM), what does it mean for available amounts of stock in the future? Will there be a shortage of available shares? At the current pace IBM will effectively buy the entire company back in 20 years. Or will companies have to shift to greater dividend increases as share counts decrease over time?

Thank you for sharing your thoughts.
soham_daptardar
Soham_daptardar premium member - 7 months ago
Hello Bill,

With the Fed tapering probably happening in a few months, what do you think will be the effect on the financial sector's stocks?

Thanks in advance.
fkattan
Fkattan premium member - 7 months ago
Mr. Nygren:

Thanks for sharing you time with this questions.

I would like to know what is your thesis for AIG? What did you see that made you think it was worth a big bet in your fund's holdings? What are the key points you look at when you invest in an insurance company?

Thank you in advance for sharing your thoughts.
darent
Darent premium member - 7 months ago


Mr. Nygren:

With your PMV/relative approach to valuation, what adjustments do you make to your process to protect your portfolio against the risk that all assets might be overvalued in the marketplace?

Thank you for your thoughts.
vgm
Vgm - 7 months ago
Bill,

Thanks for taking our questions. I'd value your responses on the following:

1. How do you personally try to improve your investing methodology on an on-going basis?

2. Who is your all-time favorite investor and why?
shb600
Shb600 premium member - 7 months ago
How badly would DTV be hurt by losing the NFL Ticket? How big is the threat of GOOG to OMC?
luishernadez
Luishernadez premium member - 7 months ago
Mr. Nygren,

Please explain your views on DIRECTV and National Oilwell Varco (valuation, future growth, competitive advantages, management, etc.).

Regarding DTV, what is your view on their maintenance capex in relation to their stated current capex (growth vs. maintenance)? And how do you see those maintenance capex in the future (5 years from now)?

Thanks,

Luis Hernandez
g8trip
G8trip premium member - 7 months ago
Mr. Nygren,

What is the biggest investment mistake you made while at Oakmark, what did you learn from it, and how can other value investors apply this knowledge to their research and portfolio management process?

Thank You.
fullpress
Fullpress - 7 months ago
Hi -- What do you think of an investment in SDR or SDT now?
msubks
Msubks premium member - 7 months ago
Hi Bill-

Do you think Blackberry can pull off a turnaround, or do you think it value is simply tied to their intellectual property? If you were to assign Blackberry currently a hand value, what would it be? Something like a 16, or a 19? Is dollar terms, what do you think their fair true fair market value is?

What are some good books to read for investing and portfolio allocation?

Thanks for your time and consideration.

Sincerely,

Brian
TannorP
TannorP premium member - 7 months ago
Hi Bill,

Over the years that you have been in the business, upon reflection where do you think you have found the most "valuable" ideas over your career?

What was the most valuable idea in your career and where was it found?

Cheers,

Tannor Pilatzke

lmsx2
Lmsx2 - 7 months ago
Hi Bill,

1. what percentage of your portfolio do you intentionally keep in cash to take advantage of the occasional "event" driven stock selling?

2. You obviously buy large quantities of stock to fill a position – do you buy in tranches i.e. you have in mind a certain amount you’d like to invest and then you buy a percentage and wait for the price to go down/up to purchase an additional tranche?

3. What do you do with distributions (dividends, etc.) – reinvest, mix them in with your cash for future purchase or other?

Thanks for sharing your valuable perspectives, Lenny

phillwilson11
Phillwilson11 - 7 months ago
Hi Bill,

What would you say was the one book, teacher, job, or whichever, that shaped your stock picking philosophy?

Phill Wilson
Dan J
Dan J - 7 months ago
Bill,

I am an investor in both OAKMX and OAKIX and am very appreciative of your and your colleagues' work as fund managers.

My question: do you think it is possible for an intelligent amateur investor to select an active fund manager who is more likely than not to outperform the average fund or benchmark in his category going forward? If so, how do you think the investor can do that?

Thanks,

Dan J

Dan J
Dan J - 7 months ago
Maybe, some extra background on my question -

I used to think that I could select active managers, because I seemed to consistently realize 1-2% better results than the corresponding indexes for a very long stretch of time. But more recently, I started learning about "factor investing", one of the "factors" being low volatility. And, it turns out that I had systematically tended to favor low volatility funds over my investing history. (Not the only criterion, but one of my favorites.) The reason is that I had observed over time that if I selected funds that had both modest trailing outperformance and lower than average volatility, the outperformance of those funds seem to have more persistence than the ones with trailing outperformance and higher volatility.

So now I am wondering whether all I was doing was to "harvest the low volatility premium" as people would say nowadays, rather than to exhibit skill at selecting a manager.

(My second favorite criterion is to read manager comments carefully and make a qualitative judgement about whether the manager seems to know what he is talking about. However I would have a hard time writing down my recipe for doing that. Whether that has made any difference, I have no idea.)

Anyway I would be very interested in any perspective you might have on this question.

Dan J

handworn
Handworn - 7 months ago
Bill, your approach seems purely Grahamian rather than Buffett's variation on Graham's work. In light of the constant tax bite of selling when a stock reaches intrinsic value, are you ever tempted to follow Buffett and continue holding it so long as the business is operating well?
Obrien.peter
Obrien.peter - 7 months ago
Mr. Nygren, you have been quoted as saying you sell when a company is fairly valued rather than waiting for it to become over-valued because you would not buy a company that is merely fairly valued. One might argue that the problem with that argument is that the only company which would meet that buy criteria is one which has been undervalued sufficiently to be in your portfolio and then rises to be fairly valued-- that is, only the company you are selling. So, it would not be a feasible buy criteria, but could be a good tweak to your sell criteria. Since "the growth guys" generally overpay, and since there is evidence that momentum can be profitably combined with value investing, do you think this counter-argument has any merit? (I have been an Oakmark Select investor for many years and greatly appreciate what you have done for me!)

Peter
vgm
Vgm - 7 months ago
FOR INFORMATION

There's a 90-minute video of Bill Nygren in a Q&A session at Columbia Business School, from Spring 2012. I could be wrong, but I'm not aware that this has been mentioned previously on GF.

The visual and sound quality of the video leaves something to be desired, but the content of the discussion is high in my opinion:

http://www8.gsb.columbia.edu/valueinvesting/coursesfaculty/recordings

http://cbs360.gsb.columbia.edu:8080/ess/echo/presentation/eee6a6e8-24c5-4a14-b7f5-606496916946

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