Bill Nygren (Trades, Portfolio) disclosed the Oakmark Fund’s fourth-quarter portfolio earlier this week.
To achieve long-term capital appreciation, the renowned guru, who also manages the Chicago-based firm’s Select and Global Select funds, usually invests in mid- and large-cap companies. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he prefers to take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then waits for the gap between the two to close before selling.
Keeping these considerations in mind, the NPORT-P filing showed Nygren established three new positions during the three months ended Dec. 31, sold out of two stocks and added to or trimmed a slew of other existing investments. Notable trades included new holdings in Adobe Inc. (ADBE, Financial) and Magna International Inc. (MGA, Financial) as well as reduced bets on Netflix Inc. (NFLX, Financial), Gartner Inc. (IT, Financial) and EOG Resources Inc. (EOG, Financial).
Investors should be aware that, just like 13F reports, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, they collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these limited filings can provide valuable information.
Adobe
The guru invested in 550,000 shares of Adobe (ADBE, Financial), allocating 1.34% of the equity portfolio to the position. The stock traded for an average price of $319.83 per share during the quarter.
The San Jose, California-based software company, which is known for inventing the PDF and its digital media editing products, has a $147.24 billion market cap; its shares were trading around $321.62 on Friday with a price-earnings ratio of 31.84, a price-book ratio of 10.58 and a price-sales ratio of 8.60.
The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 97 out of 100, the GF Score indicates the company has high outperformance potential. While it received solid ratings for profitability, growth, financial strength and GF Value, the momentum rank was more moderate.
In the fund’s fourth-quarter commentary, Nygren said he invested in the stock following its Figma acquisition announcement, which sent the stock near a three-year low.
“Despite the market’s fears related to this transaction, we believe that Adobe is a fast-growing, high-margin business that continues to possess enduring competitive advantages,” he wrote.
Of the gurus invested in Adobe, PRIMECAP Management (Trades, Portfolio) has the largest stake with 1.39% of its outstanding shares. Ken Fisher (Trades, Portfolio), Chuck Akre (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio) also have significant holdings.
Magna International
Nygren picked up 2.5 million shares of Magna International (MGA, Financial), dedicating 1.02% of the equity portfolio to the stake. Shares traded for an average price of $56.18 each during the quarter.
The Canadian manufacturer of automotive parts has a market cap of $15.38 billion; its shares were trading around $53.78 on Friday with a price-earnings ratio of 26.76, a price-book ratio of 1.40 and a price-sales ratio of 0.42.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 82 implies the company has good outperformance potential, driven by high ratings for profitability, GF Value and momentum as well as moderate growth and financial strength ranks.
In the quarterly commentary, Nygren noted that while the company’s results have been under pressure in recent years due to depressed production volumes in the auto industry, he expects the company will “deliver material revenue growth and margin expansion” as volumes recover.
“Further, Magna is particularly well-positioned among auto suppliers because the vast majority of its business is either unaffected by or positively exposed to the megatrends of electrification and autonomy,” he wrote.
With a 2.57% stake, Hotchkis & Wiley is Magna’s largest guru shareholder. Other top guru investors include Richard Pzena (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Catherine Wood (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Netflix
The investor curbed the Netflix (NLFX) holding by 42.18%, selling 701,500 shares. The transaction had an impact of -1.27% on the equity portfolio. The stock traded for an average per-share price of $280.49 during the quarter.
Nygren now holds 961,600 shares total, which represent 2.05% of the equity portfolio. GuruFocus estimates he has gained 41.96% on the investment so far.
The streaming entertainment company, which is headquartered in Los Gatos, California, has a $140.65 billion market cap; its shares were trading around $315.83 of Friday with a price-earnings ratio of 31.74, a price-book ratio of 6.77 and a price-sales ratio of 4.52.
Based on the GF Value Line, the stock, while undervalued, appears to be a possible value trap. As such, potential investors should do thorough research before making a decision.
The company has high outperformance potential with a GF Score of 98. It raked in high ratings for four of the criteria, but the financial strength rank was more moderate.
Baillie Gifford (Trades, Portfolio) is Netflix’s largest guru shareholder with a 1.56% stake. The stock is also being held by Fisher, Frank Sands (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Tom Russo (Trades, Portfolio) and many other gurus.
Gartner
The guru’s Gartner (IT, Financial) position was slashed by 61.10%, shedding 510,524 shares. The transaction impacted the equity portfolio by -1.09%. During the quarter, the stock traded for an average price of $322.72 per share.
He now holds a total of 325,000 shares, which occupy 0.79% of the equity portfolio. GuruFocus data shows Nygren has gained 128.87% on the investment over its lifetime.
The Stamford, Connecticut-based tech company, which provides research and analysis on information technology and other related industries, has a market cap of $26.25 billion; its shares were trading around $332.02 on Friday with a price-earnings ratio of 33.24, a price-book ratio of 115.28 and a price-sales ratio of 4.91.
The GF Value Line suggests the stock is fairly valued currently.
On the back of high ratings for profitability, momentum and growth, the GF Score of 92 means the company has high outperformance potential. The financial strength rank, however, was more moderate, while the GF Value was low.
Holding 6.20% of outstanding shares, Ron Baron (Trades, Portfolio) is the company’s largest guru shareholder. Gartner is also being held by Al Gore (Trades, Portfolio)’s Generation Investment, Wallace Weitz (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Simons’ firm and Joel Greenblatt (Trades, Portfolio), among others.
EOG Resources
Nygren reduced his EOG Resources (EOG, Financial) stake by 30.39%, dumping 1.16 million shares. The transaction had an impact of -1% on the equity portfolio. Shares traded for an average price of $133 each during the quarter.
The investor now holds, in total, 2.65 million shares, which make up 2.49% of the equity portfolio and is his seventh-largest holding. GuruFocus says he has gained around 66.50% on the investment to date.
The energy company headquartered in Houston, which operates in the Permian Basin, Eagle Ford and Bakken plays, has a $66.47 billion market cap; its shares were trading around $113.16 on Friday with a price-earnings ratio of 8.89, a price-book ratio of 2.79 and a price-sales ratio of 2.29.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 84 indicates the company has good outperformance potential, driven by high ratings for four of the criteria. The GF Value rank, however, was low.
Primecap is EOG Resources’ largest guru shareholder with a 0.50% stake. The T Rowe Price Equity Income Fund (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio) also have large holdings.
Additional trades and portfolio performance
During the quarter, Nygren also entered a position in MasterBrand Inc. (MBC, Financial), divested of Diamondback Energy Inc. (FANG, Financial), pulled back on the Charles Schwab Corp. (SCHW, Financial) stake and boosted the holdings of Liberty Broadband Corp. (LBRDK, Financial) and TE Connectivity Ltd. (TEL, Financial).
The Oakmark Fund’s $13.80 billion equity portfolio, which is composed of 58 stocks, is most heavily invested in the financial services sector.
The fund returned -13.40% in 2022, outperforming the S&P 500’s -18.11% return.
