WPP (NYSE:WPP), a leading global advertising company, was the largest detractor for the quarter. Investors reacted negatively to the company’s fiscal 2017 results, reported in March. Account losses from 2016 had an abnormally high negative effect on growth in 2017. The company also announced weaker guidance for 2018. However, management indicated this is primarily due to the poor performance of legacy businesses rather than problems in the company’s digital or media divisions. Many developed-market multinational companies are cutting their advertising spending to control costs, which has in turn put pressure on global advertising agencies. WPP has admitted they were slow to recognize this trend and subsequently contain costs, but management will be more diligent to such changes going forward. WPP’s media and digital businesses are performing well and have good growth prospects, although the company is facing some short-term pressure. Despite the challenging short-term situation, our investment thesis for WPP is intact, and we used its recent share price weakness to increase our position.
From Bill Nygren (Trades, Portfolio)'s first quarter 2018 Oakmark Global Select Fund commentary.
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