Since we believe our approach can identify above-average stocks, we take a very different tack. The problem with owning so many stocks that mistakes don’t matter, is that successes won’t matter then either. At Oakmark, we want to own enough of each of our stocks so that our successes do matter.
The Oakmark Fund is the more diversified of the two Funds I work on. But even Oakmark is much more concentrated than the average mutual fund. At most times our portfolio is invested in about 50-60 stocks, roughly half the average fund’s number of holdings. A typical position for us is just under 2% of assets, and it is unusual to have a position as high as 4% of assets. We keep Oakmark this diversified so that we are comfortable when a long-term investor tells us they have put most of their stock market investments in The Oakmark Fund.
The Oakmark Select Fund owns less than half as many stocks as The Oakmark Fund does – usually about 20 stocks. It is a non-diversified Fund, and because of that, we routinely caution that it is a high-risk strategy to use it as your only mutual fund. With only 20 stocks, a normal position for Oakmark Select is about 4% of assets (bigger than Oakmark’s largest position), and our top holdings are usually a double-digit percentage of the portfolio. For example, both Funds’ largest position today is Washington Mutual. It represents 3% of Oakmark’s assets and 15% of Select’s. If Washington Mutual continues to be a profitable stock, then it will be an important positive for Oakmark, but it will be far more important to Select. And if it doesn’t, Select will suffer more than Oakmark does. We believe that the risk is worth taking, but we need Select’s shareholders to understand the volatility they could experience.
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The Oakmark Fund is the more diversified of the two Funds I work on. But even Oakmark is much more concentrated than the average mutual fund. At most times our portfolio is invested in about 50-60 stocks, roughly half the average fund’s number of holdings. A typical position for us is just under 2% of assets, and it is unusual to have a position as high as 4% of assets. We keep Oakmark this diversified so that we are comfortable when a long-term investor tells us they have put most of their stock market investments in The Oakmark Fund.
The Oakmark Select Fund owns less than half as many stocks as The Oakmark Fund does – usually about 20 stocks. It is a non-diversified Fund, and because of that, we routinely caution that it is a high-risk strategy to use it as your only mutual fund. With only 20 stocks, a normal position for Oakmark Select is about 4% of assets (bigger than Oakmark’s largest position), and our top holdings are usually a double-digit percentage of the portfolio. For example, both Funds’ largest position today is Washington Mutual. It represents 3% of Oakmark’s assets and 15% of Select’s. If Washington Mutual continues to be a profitable stock, then it will be an important positive for Oakmark, but it will be far more important to Select. And if it doesn’t, Select will suffer more than Oakmark does. We believe that the risk is worth taking, but we need Select’s shareholders to understand the volatility they could experience.
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