Oakmark Fund Sells General Mills, American Express, Chesapeake Energy

Before filing his complete portfolio update not due for several weeks, Bill Nygren (Trades, Portfolio) in his first quarter letter from Friday disclosed some highlights of his fund’s activity, including the end of four positions.

Nygren, portfolio manager of the Oakmark Fund, sold all of his shares in General Mills (GIS, Financial), American Express (AXP, Financial), Union Pacific (UNP, Financial) and Chesapeake Energy (CHK, Financial). He did not add any new positions during the first quarter of 2016.

The Oakmark Fund declined 1% for the first three months of the year, with the benchmark S&P 500 stock index ending the period up almost 1%.

Nygren took the early year’s volatility in stride and remained interested in the “pronounced weakness” in the financial sector, which composes a third of his portfolio. That sector ended the quarter down 5.6% and is the third worst performer of the S&P over the past year, declining 8.6%.

“Interest rates remained at decades-low levels during the quarter, fueling ‘lower for longer’ concerns, which along with worries about energy exposure added further pressure to the Fund’s financial stocks. At Oakmark, we remain focused on assessing the long-term underlying value of businesses, which we believe are much less volatile than stock prices,” his letter said.

The sells

General Mills

At fourth quarter-end, Nygren’s Oakmark Fund held 4,066,000 shares of General Mills Inc. It was 1.45% of the portfolio and 0.68% of the company’s outstanding shares. A holding since first quarter 2014, the position was a positive contributor to the fund with a total estimate gain of 18% as of Monday.

“General Mills has provided favorable returns since we added the stock in early 2014, and we sold our position as the share price approached our estimate of intrinsic value,” Nygren’s letter said.

About the other three sells, Nygren said: “When a business doesn’t meet our expectations, we reduce our intrinsic value estimate accordingly, and the remaining three eliminations fall into that category. Selling our positions in American Express, Union Pacific and Chesapeake Energy allowed us to take tax losses while reinvesting proceeds into businesses in which we have more long-term confidence.”

American Express

Nygren owned 4.8 million shares of American Express. The holding was 2.1% of the portfolio and 0.5% of outstanding shares. Nygren’s total estimated loss on the holding was 23%.

Union Pacific

Nygren held 2.95 million shares of Union Pacific Corp. The holding was 1.42% of the Oakmark Fund portfolio and 0.35% of the company’s outstanding shares. He had a total estimated loss on the position of 6%.

Chesapeake Energy

Nygren held 12 million shares of Chesapeake. The holding was 0.33% of the portfolio and 1.8% of outstanding shares. Nygren’s total estimated loss on the holding was 78%.

Nygren said of the holding: “Specifically, Chesapeake Energy has been a poor performer as oil prices have dropped from over $100 per barrel to less than $40 per barrel. Therefore, we swapped our Chesapeake holdings for other energy holdings that are also undervalued based on expected cost-cutting and higher commodity prices, but have what we believe are stronger balance sheets.”

See more of Bill Nygren (Trades, Portfolio)’s portfolio here. Click here to get more great information by starting a free 7-day trial of Premium Membership to GuruFocus.