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Sticking to his guns; "fallen angels."

July 05, 2006

Bill Nygren feels like the boy who cried wolf. For three years, the lead manager of Oakmark and Oakmark Select has said that stocks of the biggest companies offered the best value in the U.S. market. For three years, investors have waited for the wolf to come as stocks of small and midsize companies have outperformed shares of larger companies. Nygren sounded his call to arms again Friday in a speech at the Morningstar conference in Chicago. He acknowledged that "investors are tired of hearing'' him make the same call that doesn't pan out.

But Nygren is sticking to his guns. He's honing in on stocks that traded at sky-high valuations in early 2000 but have dropped to dirt-cheap prices. The price-earnings ratios of most of these stocks are selling unusually close to the underlying company's growth rates. This means investors don't have to pay premium prices to own a higher quality company.

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