During the quarter we added two new positions to the Fund, Monsanto (MON) and Fiat Chrysler, and eliminated Medtronic because its share price appreciated towards our estimate of intrinsic value.
We believe Monsanto (MON) is a very high quality company with above average growth prospects and an exceptionally strong competitive position in a large and consolidated industry. Low corn prices, challenges in valuing the company’s biotech pipeline, and the difficulty of quantifying upside from precision agriculture have caused Monsanto to sell for materially less than our estimate of its intrinsic business value. Management has been smart about capital allocation, both by repurchasing shares using cheap fixed-cost long-term debt and by attempting to purchase Syngenta at a price that should produce a strong return for shareholders, and in our view both Monsanto’s technological advantages and end markets are likely to grow.
From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund Second Quarter 2015 Commentary.
