Bill Nygren (Trades, Portfolio) is the portfolio manager of the Oakmark Fund. I think it is important to analyze key holdings from prominent fundamental-oriented hedge funds because hedge funds have more analytical resources to analyze stocks than the majority of individual investors. Let's analyze Oakmark Fund's most interesting stock selections:
Largest position - Bank of America Corporation (BAC, Financial)
Oakmark Fund holds 3.51% of its portfolio in Bank of America. Here is a snapshot of Bank of America's recent quarterly performance.
In the third quarter, BAC reported EPS declined by 5% year over year and revenue declined by 3%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to take a look is the level of annual EPS growth.
Bank of America generated 109% growth in EPS in FY2014 and consensus analyst expects 3% decline in 2015 and 10% growth in 2016.
Earnings surprises
One important aspect in analyzing stocks is evaluating the level of surprises in the past, and most importantly in the last reported quarter. In the last quarter, BAC reported EPS of 34 cents compared to consensus expectations of 33 cents per share. This is a 1-cent difference earnings surprise. In the past three quarters, BAC surprised analyst consensus estimates by 3.03%, 2.78% and 3.45%.
Second position - Citigroup Inc. (C, Financial)
Oakmark Fund holds 2.85% of its portfolio in Citigroup. Here is a snapshot of Citigroup's recent quarterly performance.
In the third quarter, Citigroup reported EPS growth of 37% year over year and revenue decline of 6%. In the previous two quarters, the company had reported EPS growth of 17% and 18%, while revenues declined by 2% and 4%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to take a look is the level of annual EPS growth.
Citigroup's EPS declined by 20% in FY2014 and consensus analyst expects 53% growth in 2015 and 4% in 2016.
Earnings surprises
In the third quarter, Citigroup reported EPS of $1.31 compared to consensus expectations of $1.28 per share. This is a 3-cent difference earnings surprise. In the past three quarters, Citigroup surprised analyst consensus estimates by 2.34%, 8.21% and 9.35%.
Third position - MasterCard Inc. (MA, Financial)
Oakmark Fund holds 2.78% of its portfolio in MasterCard. Here is a snapshot of its recent quarterly performance.
In the third quarter, MasterCard reported EPS growth of 5% year over year and revenue growth of 2% year over year. In the previous two quarters, the company had reported EPS growth of 6% and 22%, while revenues grew at 1% and 3%. It is essential to look for companies with solid growth in both EPS and sales because that is what ultimately drives the shares.
Another important aspect to take a look is the level of annual EPS growth.
MasterCard generated 19% growth in EPS in FY2014 and consensus analyst expects 8% growth in 2015 and 16% in 2016.
Earnings surprises
In the third quarter, MA reported EPS of 91 cents compared to consensus expectations of 87 cents per share. This is a 4-cent difference earnings surprise and is a good element to see in the stock.Â
