Bill Nygren

Bill Nygren

Last Update: 06-01-2017

Number of Stocks: 50
Number of New Stocks: 3

Total Value: $16,249 Mil
Q/Q Turnover: 5%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Bill Nygren Watch

  • David Herro and Bill Nygren Comment on GE

    GE (NYSE:GE), a global producer of industrial, household and medical goods, was the largest detractor for the quarter, declining 9%. Shares were weak due to the company’s exposure to energy end markets (which was increased via its merger with Baker Hughes, a contrarian acquisition we believe will prove to be well timed). The stock was also hurt by an analyst downgrade during the quarter, which cited concerns that GE’s cash flows were lagging behind the company’s reported profits. In our view, this concern will prove to be irrelevant to the long-term investment case, as two of GE’s longest cycle businesses (aviation and power) are in the midst of their largest new product launches ever, both of which require large investments in inventory and other working capital accounts that will reverse over time. In addition, GE has recently worked to reinvent its portfolio and possesses a renewed focus on achieving appropriate capital returns. As such, the company completely revamped its variable compensation plan for thousands of employees who are now paid on a number of factors that emphasize improving its return on invested capital. We believe such changes will lead to much better performance and that GE’s long-term outlook, therefore, remains promising.

      


  • David Herro and Bill Nygren Comment on CNH Industrial

    CNH Industrial (NYSE:CNHI), a global agricultural and construction equipment manufacturer, was the top contributor for the quarter, returning 18%. The company delivered positive first quarter earnings, as both its revenue and earnings exceeded consensus estimates. The industrial business saw an improvement with its year-over-year earnings increasing 34%, driven primarily by a 77% improvement in the agriculture equipment segment. The industry has seen stabilization in global agricultural equipment markets and is beginning to see the early stages of restocking. Also during the quarter, S&P raised CNH’s credit rating to investment grade, which should allow the company to improve its balance sheet efficiency and refinance its debt at lower rates.

      


  • David Herro and Bill Nygren's Oakmark Global Select Fund Commentary for 2nd Quarter 2017

    The Oakmark Global Select Fund returned 6.2% for the quarter ended June 30, 2017, outperforming the MSCI World Index’s 4.0% return. Most importantly, the Fund has returned an average of 8.8% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 5.3% over the same period.


    CNH Industrial (NYSE:CNHI), a global agricultural and construction equipment manufacturer, was the top contributor for the quarter, returning 18%. The company delivered positive first quarter earnings, as both its revenue and earnings exceeded consensus estimates. The industrial business saw an improvement with its year-over-year earnings increasing 34%, driven primarily by a 77% improvement in the agriculture equipment segment. The industry has seen stabilization in global agricultural equipment markets and is beginning to see the early stages of restocking. Also during the quarter, S&P raised CNH’s credit rating to investment grade, which should allow the company to improve its balance sheet efficiency and refinance its debt at lower rates.

      


  • Bill Nygren Comments on Charter Communications

    Charter Communications (CHTR - $331)

    Charter (NASDAQ:CHTR) gives us the opportunity to invest in what we believe is a strong business with exceptional management at an attractive price. Because of their valuable infrastructure, U.S. cable companies are benefiting from strong demand for high-speed Internet access. In many markets, Charter has the only fiber-rich network capable of providing consumers with the high Internet speeds they demand. We believe that new competitors are unlikely to enter the market as they will have to invest massive amounts of capital for fractional penetration. This should provide a long runway for continued growth at Charter. Chairman and CEO Tom Rutledge earned an excellent reputation for execution at Cablevision, and he has achieved meaningful progress with the legacy Charter business. Corporate governance at Charter is influenced by Dr. John Malone. We’ve had tremendous success investing alongside Dr. Malone over the past 30+ years, and we greatly value his strategic vision and capital allocation skills. After reporting its first quarter earnings, Charter’s stock price lagged behind the market as investors appeared to be frustrated with the pace of operational improvement at Time Warner Cable. Our experience investing in turnarounds reminds us that it takes more than a couple of quarters to make meaningful progress. We take a more positive, longer term view of the business, and Charter is valued at a discount to peer companies.

      


  • Bill Nygren's Oakmark Fund Second Quarter 2017 Commentary

    The Oakmark Fund increased 3.8% in the second quarter of 2017, which was ahead of the 3.1% gain for the S&P 500 Index. This was the fourth quarter in a row in which the Oakmark Fund hit an all-time high adjusted NAV. Broader market strength continued in the second quarter despite lingering concerns about healthcare and tax reform, as well as a drop in energy commodity prices. As was the case in the first quarter, weakening oil prices hurt the performance of our energy holdings during the second quarter, but we remain confident in the long-term outlook for these businesses. With no change in our fundamental outlook for our energy businesses, the lower share prices represented an opportunity to increase the return potential of the portfolio, and accordingly, we added to most of our energy holdings during the quarter.


    Our biggest contributing sectors were financials and information technology, and our lowest contributing sectors were energy and industrials. Our top individual contributors were Citigroup (NYSE:C), Nestlé (OTCPK:NSRGY) and Alphabet (NASDAQ:GOOGL). Citigroup—and many of our other financial holdings—benefited late in the quarter from generally favorable results from the Federal Reserve’s capital analysis review. We are pleased that Citigroup, as well as our other financial holdings, will have greater flexibility to return capital to shareholders through higher dividends and larger share repurchase programs. Alphabet produced a total return of 10%, primarily because of strong first quarter results. The company’s revenue was up over 20% during the quarter, and Alphabet disclosed that YouTube achieved one billion hours watched per day. We have said that YouTube represents a source of unappreciated value within Alphabet, and this disclosure helped to validate our thinking. Our largest detractors were Anadarko, National Oilwell Varco and General Electric. We initiated a new position in Charter Communications during the quarter, and we didn’t eliminate any positions.

      


  • Gurus’ Holdings With Negative Performances

    While gurus hold positions in these companies, the stock prices and returns continue to fall. These are the worst-performing stocks over the last three months with a long-term presence in more than three gurus’ portfolios.


    Harley-Davidson Inc. (HOG) had a negative performance of 5.1% over the last six months. Three mutual funds hold the stock with a total weight of 0.20% on their portfolios.

      


  • Chuck Akre Buys Moody, Visa, Mastercard

    Chuck Akre (Trades, Portfolio) is the founder of Akre Capital Management LLC. He manages a portfolio composed of 31 stocks with a total value of $6.083 billion. During the first quarter the guru bought shares in the following stocks:


    The position of Moody's Corp. (MCO) was raised by 21.87% with an impact of 1.88% on the portfolio.

      


  • Bill Nygren Gains 3 Holdings, Divests 2 Others in 1st Quarter

    Oakmark Funds’ Bill Nygren (Trades, Portfolio) established three positions and sold two others during the first quarter.


    A patient investor, Nygren invests in companies that are trading at a discount with the belief the stock price will climb higher to reflect the underlying business’ value. During the quarter, he established stakes in Delphi Automotive PLC (NYSE:DLPH), Chesapeake Energy Corp. (NYSE:CHK) and Moody’s Corp. (NYSE:MCO).

      


  • Nygren Sticks to Bottom-Up, Long-Term Value

    When Bill Nygren (Trades, Portfolio) was growing up, his mother regularly went bargain hunting to stretch the family’s purchasing power.


    The son carries on the tradition except Nygren searches for bargain stocks rather than bargain groceries. Using disciplined, bottom-up fundamental research, he and his team identify stocks that trade well below their underlying value. After they find and buy those stocks, they wait for the market to come back around to their view of that value, making them long-term investors.

      


  • Maybe US Stocks Aren't Overvalued - Bill Nygren

    Over the past 50 years, the trailing price-to-earnings ratio for the S&P 500 has averaged 16.1x. At the end of 2016 that ratio was 20.6x. Many investors have used that number or other variations to conclude that the current market is expensive and have therefore shifted their asset allocation away from equities.


    We aren’t market timers at Oakmark. We have faith that the long history of the equity asset class outperforming other asset classes is likely to continue. Sure, there will be years here and there when the return on equities is negative, but over the long run, equities have dominated other asset classes and we see no reason for that to change. Other investors, despite professing the same faith in the long-term prospects of corporate America, spend a tremendous amount of time trying to guess when those down years will occur, believing their returns could be enhanced by moving to cash before the anticipated price corrections.

      


  • Bill Nygren Comments on Moody’s

    Moody’s (NYSE:MCO) provides essential information to the world’s capital markets. We have a long history with Moody’s, dating back to the 1990s when it was a part of Dun & Bradstreet. The stock briefly traded for less than 17x 2018 earnings estimates because investors feared that rising interest rates and changing tax policies would depress debt issuance. Although such events would likely result in slower growth in the short term, we believe the company’s long-term prospects remain compelling. Bonds issued with a Moody’s rating pay meaningfully lower interest rates than those without a Moody’s rating, and the price paid to Moody’s is much lower than the interest savings the issuer realizes. We believe this will create consistent demand for bond ratings as debt markets grow. Management is cognizant of the value that the Moody’s rating provides, and they are able to steadily raise prices year after year. In our view, Moody’s is a great business with growing profits, run by a management team we’ve known and respected for years, and the shares trade at a price that is well below our estimate of intrinsic value.


    From the Oakmark Select Fund first-quarter 2017 shareholder letter.

      


  • Bill Nygren Comments on Delphi Automotive PLC

    Delphi (NYSE:DLPH) is an automobile parts supplier that is well positioned for the secular trends that will continue to drive the auto industry. We believe Delphi will benefit from increasing governmental regulations for safety, fuel efficiency and emissions control, as well as rapidly growing consumer demand for vehicle connectivity. Since Delphi’s initial public offering in 2010, we find the company has generated robust sales and earnings growth along with ample free cash flow. Despite strong fundamental performance, the stock trades at a discount to the market P/E as well as our estimate of intrinsic value due to concerns about the U.S. auto cycle, short term uncertainty in China and an uncharacteristic downward revision to earnings guidance in 2016. We believe these headwinds will prove temporary and that the company’s performance will improve.


    From the Oakmark Select Fund first-quarter 2017 shareholder letter.

      


  • Bill Nygren Comments on Chesapeake Energy Corp

    The downturn in oil and gas prices since late 2014 has created an opportunity to buy well-managed exploration and production companies at discounted values. We believe Chesapeake Energy (NYSE:CHK) is among the best managed oil and gas companies and is trading well below the value of its assets. The company has sizeable acreage holdings across the U.S., and its management is focused on developing these assets in a cost-effective and high-return manner. The team has successfully navigated the commodity price downturn while prioritizing the interests of equity holders, and we expect this shareholder-friendly team will continue to create value in an improving commodity price environment. With the enterprise trading at a substantial discount to our estimate of asset value, we believe Chesapeake is an attractive holding.


    From the Oakmark Select Fund first-quarter 2017 shareholder letter.

      


  • Oakmark Select Fund First Quarter 2017

    For the quarter, the Oakmark Select Fund increased 3%, compared to a 6% gain for the S&P 500 Index. While good on an absolute basis, we aren’t satisfied by the relative return this quarter, but understand that our investment process of buying companies that have a clear path to per-share value growth, that are run by strong management teams, and that trade at significant discounts to intrinsic value works well on average and over time, but not necessarily every quarter.


    Nearly half of the underperformance relative to the S&P 500 came from our two energy holdings as oil and gas prices pulled back somewhat during the quarter. The three largest detractors—Apache (-19%), Chesapeake Energy (-15%) and General Electric (-5%)—all have direct or indirect exposure to oil and gas prices. Energy price volatility notwithstanding, the fundamentals of all three companies are largely tracking with our expectations. Furthermore, recent oil and gas property transactions confirm our belief that Apache and Chesapeake Energy are trading at substantial discounts to fair value, and in the case of Chesapeake, insiders have been buying stock. We added to the Fund’s holdings in both Chesapeake and Apache during the quarter.

      


  • Oakmark Fund First Quarter 2017 Shareholder Letter

    The Oakmark Fund increased 4% in the first quarter of 2017, hitting an all-time high adjusted NAV for the third quarter in a row. The Oakmark Fund lagged behind the S&P 500’s strong 6% gain. Although the S&P 500 also hit new highs during the first quarter, the momentum from January and February faded in March as concerns grew over the Trump administration’s plans for healthcare reform, new infrastructure spending and tax reform. Oil commodity prices also weakened in March, which hurt the performance of our energy holdings during the quarter, but we believe supply-and-demand dynamics will lead to higher commodity price trends over the long term. The information technology sector was especially strong during the first quarter, with the NASDAQ Index gaining 10%. In addition, the information technology sector has provided the highest contribution to return of the Oakmark Fund over the past three years, with several holdings returning more than 20% annually (Apple, Microsoft and Texas Instruments).


    Our best contributing sectors for the first quarter were information technology and consumer staples. Apple and Unilever were the best individual performers, up 25% and 22%, respectively, and the information technology sector as a whole returned 8%. Our lowest contributing sectors for the quarter were energy and consumer discretionary. Our worst individual securities for the quarter were Apache and Anadarko. During the quarter, we added new positions in Chesapeake Energy, Delphi Automotive and Moody’s (see below). We eliminated positions in Halliburton and Sanofi. Halliburton was sold when it reached our estimate of intrinsic value, and Sanofi was sold because we believed we had higher-conviction, higher-return options within the healthcare sector.

      


  • Intel Increases Quarterly Dividend

    Intel (NASDAQ:INTC) has announced a quarterly dividend of 27.25 cents with an ex-dividend date of May 3. The dividend is a 5% increase from the previous dividend of 26 cents. With the March dividend, the stock now has a forward dividend yield of 3.06%.


    Intel is trading for $35.49. Year to date it has a return of -2.24%. Its one-year return is 11.15%, and it has a three-year return of 38.39%. Key factors influencing the year’s lows are competition from Advanced Micro Devices (AMD) and speculation on its acquisition of Mobileye (NYSE:MBLY).

      


  • Bill Nygren Sells Bank of America, T. Rowe Price, Goldman Sachs

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. During the fourth quarter the guru sold shares in the following stocks:


    He closed his stake in Principal Financial Group Inc. (PFG) with an impact of -2.02% on the portfolio.

      


  • Oakmark: Sacrificing the Short Term for the Long Term

    Eric Liu is a Portfolio Manager and Senior International Investment Analyst at Harris Associates. Prior to joining Harris Associates in 2009, Eric was a Research Associate at Dodge & Cox and an Investment Banking Analyst at Jefferies & Company. He received an MBA from the University of Chicago and a BA from the University of California Los Angeles.


    2016 was an unusually volatile year for global equity markets and our strategies. The beginning of the year was marked by a sharp sell-off in global equities due to growth concerns in China, the devaluation of the yuan and falling commodity prices. At one point during the first quarter, the Oakmark International Fund was down over 16%. Markets then recovered from their February lows, but this was short lived as Britain voted to exit the European Union in late June, which led to uncertainty across global markets and another sell off of equities. At the end of the year's first fiscal half, the Oakmark International Fund was down over 10%. Through this downward volatility, we did not waiver and instead used it as an opportunity to initiate new positions in companies that we viewed as undervalued and further build up stakes in our most underappreciated holdings.

      


  • Herro and Nygren Comment on Ingenico Group

    During the quarter, we initiated one new position in France-based Ingenico Group (XPAR:ING), a global leader in secure electronic payment solutions. The company provides products and services that include point-of-sale payment terminals, payment software and mobile e-payment solutions. We eliminated our positions in China ZhengTong Auto Services (China) and Ichiyoshi Securities (Japan) during the quarter. Also in December, the acquisition of gategroup (Switzerland) by Chinese conglomerate HNA Group was completed.

      


  • Herro and Nygren Comment on Incitec Pivot

    A top-performing stock for the quarter was Incitec Pivot (ASX:ISL), an Australian manufacturer of mining explosives, fertilizers and industrial chemicals. Incitec Pivot’s share price reacted favorably following the company’s fiscal year earnings report that was released in early November. Overall, these results were in line with our estimates and represent what we believe is solid performance in the face of significant macro headwinds across Incitec's businesses. We met with management in December, and found that their efforts to reduce costs during 2016 were substantive and helped counter tough market conditions that significantly affected their earnings, such as steep price declines for fertilizers. Overall, the company expects its markets to remain challenging in 2017. However, management is on track to deliver additional cost savings to help combat this, and certain markets seem to be improving, including the mining explosives and urea markets. In addition, the company is now in position to harvest the benefits of a period of significant capital investment. Even with the recent share price advance, we believe Incitec Pivot is trading at a substantial discount to the company’s true worth.

      


  • Herro and Nygren Comment on Citigroup

    Citigroup (NYSE:C)’s global franchise gives it a unique advantage because it has more than twice as many country banking licenses as its closest competitor. This unique global reach is an attractive asset and difficult to replicate in today’s regulatory environment. We believe Citigroup has substantial excess capital, which—combined with its significant deferred tax assets—should give the management team many opportunities to increase shareholder value.

    From David Herro (Trades, Portfolio) and Bill Nygren (Trades, Portfolio)'s Oakmark Global Select Fund fourth quarter 2016 commentary.  


  • Herro and Nygren Comment on Lloyds

    We have been following Lloyds (NYSE:LYG) for some time, and the U.K.’s recent decision to withdraw from the European Union translated to a decline in Lloyds’ share price. In our estimation, this price drop greatly exceeded any actual loss of intrinsic value of the company, and we believe Lloyds is undervalued relative to its normalized earnings power.

    From David Herro (Trades, Portfolio) and Bill Nygren (Trades, Portfolio)'s Oakmark Global Select Fund fourth quarter 2016 commentary.  


  • Herro and Nygren Comment on Danone

    Danone (XPAR:DN), one of the largest dairy food producers and bottled water suppliers in the world, was the largest detractor for the quarter, declining 14%. Danone’s third-quarter results were weaker than expected given continued destocking in both its Waters and Early Life Nutrition segments. The Waters division is suffering from oversupply as growth normalizes in China. Early Life Nutrition has been hurt by regulatory changes in China since distribution is shifting from indirect to direct. We believe both divisions will continue to be weak in the short term. Additionally, Danone is in the process of acquiring WhiteWave, a U.S.-based dairy food producer, and investors reacted negatively to WhiteWave’s third-quarter results, which fell short of expectations. We continue to believe the strategic rationale behind the WhiteWave acquisition is sound. It will enable Danone to integrate fast-growing brands and gain leverage with retailers, which should lead to improved competitive positioning. In December, Danone amended fiscal-year guidance by lowering organic growth but increasing operating margins. The organic growth shortfall is due to weakness in its European Fresh Dairy division, attributed to a shortfall in the Activia relaunch. Management believes a more tailored approach on a country-by-country basis should remedy the shortfall. Although Danone faces some near-term headwinds, we believe it remains an attractive investment for our shareholders.

      


  • Herro and Nygren Comment on Bank of America

    Bank of America (NYSE:BAC), one of the biggest U.S. banks, was the largest contributor to performance for the quarter, returning 42%. Bank of America’s share price reacted positively to third-quarter results that showed strong capital market performance and healthy loan and deposit growth. The election of Donald Trump further boosted Bank of America’s stock price amid investors’ expectations that a Trump administration would lead to less regulation. Additionally, the president-elect has promised to boost economic growth, which should allow for interest rates to return to more normalized levels and benefit companies in the financials sector. We believe an improving interest rate environment, along with additional expense reductions and continued share repurchases, will drive strong EPS growth over the next several years. At its current price, we believe Bank of America remains undervalued.

      


  • Herro and Nygren's Oakmark Global Select Fund Fourth Quarter Commentary

    The Oakmark Global Select Fund returned 7% for the quarter ended December 31, 2016, outperforming the MSCI World Index’s 2% return. For the calendar year, the Fund returned 10%, outperforming the MSCI World Index’s return of 8%. The Fund has returned an average of 8% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 5% over the same period.


    Bank of America (NYSE:BAC), one of the biggest U.S. banks, was the largest contributor to performance for the quarter, returning 42%. Bank of America’s share price reacted positively to third-quarter results that showed strong capital market performance and healthy loan and deposit growth. The election of Donald Trump further boosted Bank of America’s stock price amid investors’ expectations that a Trump administration would lead to less regulation. Additionally, the president-elect has promised to boost economic growth, which should allow for interest rates to return to more normalized levels and benefit companies in the financials sector. We believe an improving interest rate environment, along with additional expense reductions and continued share repurchases, will drive strong EPS growth over the next several years. At its current price, we believe Bank of America remains undervalued.

      


  • Bill Nygren Comments on Ally Financial

    We continue to believe that financial stocks are quite undervalued as well. During the quarter we made a new investment in Ally Financial (NYSE:ALLY). Ally was founded nearly a century ago as General Motors Acceptance Corporation. Its purpose then was to provide financing to GM dealers and retail customers. Today, Ally is no longer owned by GM. It serves a wide variety of dealers (including Ford, Chrysler and Toyota), and it is carefully building a consumer franchise. In our view, investors are myopically concerned that the auto business is at a cyclical peak. U.S. auto sales are near record levels, and credit losses are below long-term averages. Some believe Ally’s earnings have nowhere to go but down. We believe cyclical pressures will be more than offset by continued internal improvements, such as funding cost reductions (low-cost online deposits grew 19% in the third quarter of 2016) and improving the capital structure. With Ally’s stock trading at roughly 68% of tangible book value, we believe Ally is a compelling addition to the Oakmark Select Fund. We didn’t eliminate any positions during the quarter and exit 2016 with 20 investments in the portfolio.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund fourth quarter 2016 commentary.   


  • Bill Nygren Comments on HCA

    HCA (NYSE:HCA) is the largest operator of for-profit hospitals and related health care services in the U.S. The company benefits from scale and size advantages, an attractive geographic footprint in higher growth markets, best-in-class management and governance, and an equity-friendly approach to capital allocation. We expect HCA to grow operating income in the mid-single digits and grow EPS in the low-double digits over time. Hospital stocks sold off following the presidential election due to concerns that the benefits from health care reform will be lost. We believe that HCA’s share price discounts the effects of repealing the Affordable Care Act. Accordingly, the shares are selling below our estimate of intrinsic value.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund fourth quarter 2016 commentary.   


  • Bill Nygren Comments on Baxter

    Baxter (NYSE:BAX) is a collection of disparate health care businesses, which include dialysis consumables, intravenous solutions and surgical sealants. These businesses represent what was left at Baxter following the spinoff of Baxalta in mid-2015. The businesses hadn’t been run optimally, and at the time of the spin were only producing 9% margins, which represents less than half of the levels we believe to be achievable. Baxter hired outsider Jose Almeida as CEO in late 2015. Oakmark Fund shareholders might fondly remember Almeida from his successful tenure as CEO of our long-time holding Covidien, where he fixed (and eventually sold) a collection of health care assets that had been spun out from Tyco International. We believe Almeida has the right skill set to improve Baxter’s margins and portfolio of assets, and that the company is selling at a large discount to intrinsic value.

      


  • Bill Nygren Comments on AutoNation

    AutoNation (NYSE:AN) is the largest automotive retailer in the U.S. The company owns and operates 371 new vehicle franchises through 261 stores, located predominantly in major metropolitan markets. The stock was down 18% in 2016 because investors were disappointed by the company’s earnings and were fearful that the auto cycle had reached its peak. The soft earnings were caused by brand-building investments, disruptions from a Takata airbag recall and poor performance in Texas. We are confident that these are short-term setbacks and that AutoNation will be able to rebound. In our view, the brand and franchise remain strong, and the company’s CEO, Mike Jackson, is a proven operator and superb capital allocator. Since Jackson became CEO in 1999, he has opportunistically used share repurchases to reduce the share base by 75%, contributing to a total return to shareholders of 346% (versus 144% for the S&P 500). We believe that paying 11x depressed earnings for an industry leader with such a strong track record is a compelling investment.

      


  • Bill Nygren's Oakmark Select Fund: Fourth Quarter 2016 Commentary

    The Oakmark Select Fund increased 10% for the quarter, compared to 4% for the S&P 500 Index. For all of calendar 2016, the Fund increased 15%, compared to a 12% gain for the S&P 500 Index. We’re happy to highlight that the Fund hit a new all-time high adjusted NAV this quarter.


    As you can see from those numbers, more than all of our 2016 outperformance came from the strong fourth calendar quarter. As always, we invest the Fund’s assets where we believe the market is presenting the most compellingly valued opportunities, and thus were 32% weighted in financials and 0% weighted in health care and consumer staples at the start of the fourth quarter. Although those weightings were responsible for some of the Fund’s relative underperformance throughout most of 2016, these sector weights proved hugely beneficial in the most recent quarter, producing over 450 basis points of relative performance versus the S&P 500 Index. Our top individual performers for the quarter, each up by at least 20%, were Fiat Chrysler (up 40%) and four financial companies (led by Bank of America, up 42%). Our biggest detractors, FNF Group and Intel (NASDAQ:INTC), were each only down single-digit percentages.

      


  • Bill Nygren's Oakmark Fund Commentary: Fourth Quarter 2016

    The Oakmark Fund returned 8% during the fourth quarter of 2016, hitting an all-time high NAV and bringing the calendar year to a gain of 18%. These strong results were ahead of the S&P 500, which was up 4% for the fourth quarter and up 12% for the calendar year. We are very pleased that recent performance showed a substantial reversal from the results reported to you following the fourth quarter of 2015. At that time, we reiterated confidence in our time-tested philosophy, investment process and research team. A big part of our process involves having the patience to wait for the gap between a company’s intrinsic value and its stock price to close. While that gap had been frustratingly large over the past couple of years, we maintained high portfolio weightings in the out-of-favor financials, information technology, and energy sectors. At the beginning of 2016, over 60% of the Fund’s equity assets were invested in these three sectors, and our long time horizon allowed us to maintain these high conviction levels throughout the year.


    Our best contributing sectors for the fourth quarter were financials and industrials. Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) were the best individual contributors, returning 42% and 49%, respectively, for the quarter, and the financials sector as a whole returned 19%. Our lowest contributing sectors for the quarter were consumer staples and health care, but our exposure to those sectors was lower than the S&P 500’s weightings. Our worst individual securities for the quarter were News Corp (NASDAQ:NWS) and Diageo (NYSE:DEO). For the calendar year, financials and information technology were the best contributing sectors, and our best individual securities were Apache (NYSE:APA) and Cummins (NYSE:CMI) (up 46% and 61%, respectively). Our lowest contributing sectors for the calendar year were consumer staples and consumer discretionary (down 1% and up 3%, respectively), and our worst contributing securities for the calendar year were Liberty Interactive QVC and Fiat Chrysler (down 27% and 22%, respectively). Liberty Interactive QVC saw some uncharacteristic product-related revenue pressure, and Fiat Chrysler faced near-term headwinds from currencies and emerging markets. During the quarter, we added new positions in AutoNation, Baxter International and HCA Holdings (see below), and we eliminated positions in Applied Materials, Principal Financial and T. Rowe Price.

      


  • Intel Gains 15% Ownership of Here International

    Intel Corp. (NASDAQ:INTC) announced on Tuesday it is acquiring a 15% stake in privately held Here International BV for an undisclosed amount.


    Here is a global provider of digital maps and location-based services located in the Netherlands. Intel is purchasing the ownership stake from the company’s current indirect shareholders, Volkswagen’s (XTER:VOW) Audi AG, BMW AG (BUD:BMW) and Daimler AG (XTER:DAI).

      


  • Bill Nygren: Investors Approaching Retirement Should Invest in More Stocks

    Bill Nygren (Trades, Portfolio), investor at the Oakmark Fund, helped investors navigate the current market, where high prices have met a president reputedly favoring economic growth policies. Nygren said that not only is it not too late for most investors to get into the market but, due to longer life spans, retirees should begin ignoring the rule of having 60% stocks and 40% bonds and allocate more to stocks.


    Because many of his holdings were the worst performer sectors earlier in the year, he is now enjoying them becoming some of the best areas of the market. Rather than attempt to time the market, Nygren said, investors should buy low-priced stocks and wait for the market to normalize.

      


  • Aon: A Stock for Risky and Uncertain Times

    Aon PLC (NYSE:AON) is an insurance brokerage company and a consulting company. When the world gets riskier, other companies turn to insurance to offload some of that risk. When the world gets more uncertain, other companies turn to consultants for advice and solutions.


    The current environment suggests these should be good times for Aon, but its share price has dipped lately. Looking at a year-to-date chart indicates this is just another blip on the upward journey of the share price, or is it?

      


  • Bill Nygren Gains MGM Resorts, Removes 3 Postions

    Bill Nygren (Trades, Portfolio), portfolio manager of the Oakmark Funds, invests in companies that trade at substantial discounts to their business value. As discussed in the fund’s prospectus, the Oakmark Select Fund seeks long-term capital appreciation based on the assumption that the company’s stock price converges to the intrinsic value over time. Nygren and his partners view each stock buy as “a piece of the business” instead of simply a stock certificate.


    The Oakmark Select Fund portfolio manager eliminated positions in LinkedIn Corp. (NYSE:LNKD), Monsanto Co. (NYSE:MON) and Fiat Chrysler Automobiles NV (NYSE:FCAU) during the third quarter. With the proceeds from these transactions, Nygren invested in 6.5 million shares of MGM Resorts International (NYSE:MGM).

      


  • Tweedy Browne Sells Halliburton, Johnson & Johnson

    Tweedy Browne is an investment partnership owned by its four managing directors, William H. Browne, John D. Spears, Thomas H. Shrager and Robert Q. Wyckoff Jr. During the third quarter the guru firm's largest sales were:


    Halliburton Co. (HAL) was reduced by 19.56% with an impact of -1.28% on the portfolio.

      


  • Bill Nygren: Joe Maddon Made the Cubs Better. Could He Do the Same for Investors?

    Bill Nygren (Trades, Portfolio) has been a manager of the Oakmark Select Fund (OAKLX) since 1996, Oakmark Fund (OAKMX) since 2000 and the Oakmark Global Select Fund (OAKWX) since 2006. He joined Harris Associates in 1983 and served as the firm's Director of Research from 1990 to 1998. He holds an M.S. in Finance from the University of Wisconsin's Applied Security Analysis Program (1981) and a B.S. in Accounting from the University of Minnesota (1980).  


  • Bill Nygren's Largest Investments of the Year

    Bill Nygren (Trades, Portfolio) is portfolio manager of the Oakmark Fund, the Oakmark Select Fund and the Oakmark Global Select Fund. The following are the best performers of his investments this year.


    Applied Materials Inc. (AMAT) with a market cap of $30.37 billion has gained 53.9% year to date. The guru's stake represents 0.84% of the company's outstanding shares and 0.15% of his total assets.

      


  • Ray Dalio's Best-Performing Investments of the Year

    Ray Dalio (Trades, Portfolio) founded Greenwich, Connecticut-based hedge fund Bridgewater Associates in 1975. Now it has more than $165 billion under management. The firm claims 13% annual returns after fees.


    Dalio owns 341 stocks with a total value of $7.977 billion. The following are his best-performing investments of the year.

      


  • Bill Nygren Comments on MGM Resorts International

    We sold our remaining shares of LinkedIn (NYSE:LNKD) and established a new position in casino operator MGM Resorts International (NYSE:MGM). We believe the recovery potential in the Las Vegas market and MGM’s profit improvement plan are both underappreciated at the current value. Meanwhile, management has been busily working to close the price-value gap on the shares by monetizing latent real estate value and improving the balance sheet. In the short time we’ve owned MGM, both the fundamentals and management actions have been consistent with our thesis.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund third quarter 2016 commentary.   


  • Bill Nygren Comments on Chesapeake

    Recall that earlier in 2016, we swapped most of our Chesapeake (NYSE:CHK) stock at approximately $4 per share for the company’s bonds at $48 per $100 par value, believing the bonds offered similar upside and less downside while capturing a tax loss. Last quarter we reported that the bonds had rallied to $85 per $100 par value, and the stock was trading at $4.28. Given the relative performance of the bonds to the stock and our comfort with the improved liquidity position of the company, we elected to swap back into the stock. Today our position in Chesapeake is exclusively in the form of equity.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund third quarter 2016 commentary.   


  • Bill Nygren Comments on Liberty Interactive QVC

    Our largest quarterly detractor was Liberty Interactive QVC (-21%) (QVCA). After a long period of rather stable but low single-digit growth, the company announced that sales fell by a mid-to-upper single digit amount in June, and these trends continued through July. The management team cited numerous company-specific reasons for the decline and is taking action accordingly. We continue to hold our position because we believe the company’s underlying value has only been modestly affected, relative to the decline in its share price.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund third quarter 2016 commentary.   


  • Bill Nygren's Oakmark Select Fund 3rd Quarter 2016 Commentary

    The Oakmark Select Fund returned 8% for the quarter, ahead of the S&P 500’s 4% return. This brings the Fund’s return for the fiscal year ended September 30, 2016 to 12%, compared to 15% for the S&P 500.


    During the quarter, our largest contributors to performance included Alphabet (+12%), Bank of America (+18%), MasterCard (+16%), and AIG (+13%). From a sector standpoint, our stock selection in Energy, as well as our selection and allocation to Financials, had the most positive impact. We also benefitted by what we didn’t own in the quarter. For some time now, we have had trouble finding value in the Consumer Staples, Utilities and Telecommunications sectors. In these sectors, we have found that share prices appear to be valued more closely to bonds, which we believe to be unattractive at current yields. Not owning these three sectors added over 1% to our performance relative to the S&P 500.

      


  • Bill Nygren and David Herro Comment on General Electric

    General Electric (NYSE:GE), a global producer of industrial, aviation and medical goods, was the biggest detractor for the quarter. While GE has benefited from improved margins and capital allocation, shares were weak during the quarter due to concerns over the company’s 2016 guidance. After producing organic growth of 1% in the first half, the company forecasts full-year organic growth between 2-4%. GE expects its Power division will drive this growth, with planned turbine shipments nearly double what they were in the first half of the year. The market appears to believe these forecasts are aggressive and expects GE management to reduce guidance when it next reports earnings. The timing of turbine shipments is essentially irrelevant to the value of the company, and our long-term investment thesis remains entirely intact.

    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund third quarter 2016 commentary.   


  • Bill Nygren and David Herro Comment on Credit Suisse

    Credit Suisse (NYSE:CS), a Swiss financial services group, was the largest detractor from performance for the fiscal year. Credit Suisse’s share price has been weak over the past year for multiple reasons. The company’s investment banking results have struggled, although we recognize the underperformance is partially due to restructuring activity and we expect performance to strengthen once restructuring is complete. One-off expenses related to litigation, pension true-up charges and write-downs on certain credit assets also hurt performance. Additionally, the U.K.’s decision to leave the European Union negatively impacted the share price. Credit Suisse’s management has responded to these challenges with a series of restructuring measures. Its management has made progress expanding its wealth management franchise, which we believe is a good move since that business is fee based, requires little capital and has very good secular growth trends. Additionally, Credit Suisse has reduced its exposure to the global markets business, which has enabled it to de-risk its balance sheet and operate with a more efficient cost structure. Credit Suisse’s management has confirmed the restructuring of its global markets business is nearing completion and should improve profitability over the coming quarters. Credit Suisse’s common equity Tier 1 ratio of 11.8%, above the 10% minimum requirement, should increase even more on the back of higher consolidated profitability.

    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund third quarter 2016 commentary.   


  • Bill Nygren and David Herro Comment on Apache

    The largest contributor to performance for the fiscal year was Apache (NYSE:APA), a global oil and gas exploration company, which returned 66%. Oil prices have been volatile over the past year, but have rebounded in 2016 thus far. Apache has specifically benefitted from solid quarterly results that have demonstrated improved capital efficiency, including a 45% decline in North American well costs compared to 2014 levels. The company also announced the discovery of a new resource play in the Permian Basin called “Alpine High.” Initial results indicate that Apache has discovered a high quality resource at a low cost. This increased our estimate of intrinsic value and also increased our confidence in management. In our view, Apache has the balance sheet and asset quality to survive continued volatility in oil and gas prices, and we like how the management team is preserving and growing per share value during the commodity price downturn.

    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund third quarter 2016 commentary.   


  • Bill Nygren and David Herro Comment on LafargeHolcim

    LafargeHolcim (XSWX:LHN), the largest cement maker in the world, was the largest contributor to performance for the quarter, returning 30%. Shares reacted positively to news that LafargeHolcim agreed to sell Lafarge India for approximately $1.4B with proceeds going to pay down debt. We are impressed with the progress management has made on defining and implementing true synergies following the merger. Additionally, second quarter results exceeded expectations and illustrated Europe’s improving pricing environment. Management reaffirmed its 2016 outlook as well as its commitment to targets set for 2018.

    From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s Oakmark Global Select Fund third quarter 2016 commentary.   


  • Bill Nygren Comments on MGM Resorts International

    We believe there are many ways to achieve strong returns from an investment in MGM Resorts International. MGM (NYSE:MGM) is a recovery story, driven by improving supply and demand in Las Vegas where MGM has significant exposure. The company’s Profit Growth Plan, which is a cost-cutting and revenue enhancement program, should lead to higher profitability and allow for significant operating leverage once sales recover. From a longer term perspective, we believe MGM will benefit from its increasing geographic diversity, strong property development pipeline and improving capital structure. We think that valuing MGM on a property-by-property basis using cash flow multiples from recent transactions produces a much higher value than the current stock price indicates.

    From Bill Nygren (Trades, Portfolio)'s Oakmark Fund third quarter 2016 commentary.   


  • Bill Nygren and David Herro's Oakmark Global Select Fund 3rd Quarter Commentary

    The Oakmark Global Select Fund returned 10% for the fiscal year ended September 30, 2016, underperforming the MSCI World Index, which returned 11% for the same period. For the most recent quarter, the Fund returned 10%, outperforming the MSCI World Index, which returned 5%. The Fund has performed well versus the MSCI World Index since inception, returning on average 7% versus 4% for the benchmark.


    The largest contributor to performance for the fiscal year was Apache (NYSE:APA), a global oil and gas exploration company, which returned 66%. Oil prices have been volatile over the past year, but have rebounded in 2016 thus far. Apache has specifically benefitted from solid quarterly results that have demonstrated improved capital efficiency, including a 45% decline in North American well costs compared to 2014 levels. The company also announced the discovery of a new resource play in the Permian Basin called “Alpine High.” Initial results indicate that Apache has discovered a high quality resource at a low cost. This increased our estimate of intrinsic value and also increased our confidence in management. In our view, Apache has the balance sheet and asset quality to survive continued volatility in oil and gas prices, and we like how the management team is preserving and growing per share value during the commodity price downturn.

      


  • Bill Nygren 3rd Quarter Market Commentary

    “The years say what the days cannot tell.”

    -Ancient Chinese proverb

      


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