Oakmark Fund portfolio manager Bill Nygren (Trades, Portfolio) stayed true to the firm’s concentrated approach during the fourth quarter, initiating one new holding and selling three others that had reached the fund’s estimate of true value.
Nygren purchased 10,456,000 shares in Ally Financial (ALLY, Financial), which traded for an average price of $19.80 during the quarter. Ally is an online banking and auto financing company whose stock has traded down 12% over the past year. In the fourth quarter 2015, Ally reported losses of $1.97 per share compared to earnings of 23 cents per share in the year-ago quarter.
In the fourth quarter commentary, Nygren addressed concerns that with auto sales near record levels and credit losses below long-term averages, some investors worry that Ally’s earnings can only go down. Nygren, however, wrote that the worries have driven the price down to just 80% of tangible book value.
“We believe cyclical pressures will be offset by continued internal improvements, such as funding cost reductions (as “legacy” liabilities are replaced with lower cost borrowings) and improving their capital structure,” he wrote.
The fund sold out its holding in Amazon (AMZN, Financial), selling 599,000 shares for an average of $631.58 per share. Nygren had purchased the holding in the second quarter 2012.
Amazon’s share price has risen 48% over the past year and is trading at a very high valuation compared to earnings. Nygren eliminated the position as the price had reached the estimate of intrinsic value, according to the quarter commentary.
GuruFocus rates Amazon’s business predictability as a perfect 5 stars based on revenue and earnings growth. In the fourth quarter, Amazon reported EPS of $1.00, up from 47 cents in the year-ago quarter.
Nygren also sold out Omnicom (OMC, Financial) for the same reason as the stock had reached Oakmark’s intrinsic value estimate. Omnicom declined 2% over the past year and trades at 17.7x earnings. The company provides advertising, marketing and communication services to clients.
The other eliminated holding was Accenture (ACN, Financial); the fund sold its 2,100,000 shares for an average price of $105.53 per share. It had purchased the shares in the third quarter of 2014 for an average $80.22 per share.
Accenture provides management consulting, technology and outsourcing services. The stock rose 13% over the last year, and its business predictability is rated 5 stars by GuruFocus.
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