We added one new name to the Fund during the quarter: General Electric (NYSE:GE), the global producer of industrial, household and medical goods. GE is a company with businesses we have always admired, but we have previously questioned the stock’s valuation and management’s focus on returns when making capital allocation decisions. However, the appointment of a new CFO in mid-2013 ushered in significant changes. Since then, GE has, in our view, acquired assets cheaply (Alstom) and sold assets at good prices (Synchrony and its appliances division). GE is also significantly reducing its financial services business to focus on those lending activities that are core to its industrial products. The company has totally revamped its variable compensation plan for thousands of employees, emphasizing factors that drive return on invested capital, which should boost future results. Some investors may have a stale opinion of GE after the past 15 years of persistent underperformance, but we believe the remaining businesses will grow in excess of global GDP with high returns on capital. We believe the current valuation is attractive for this good collection of businesses.
From Biill Nygren and David Herro (Trades, Portfolio)'s Q3 Oakmark Global Select Fund commentary.
