(GuruFocus, October 13, 2009) Investment Guru Bill Nygren published his 3Q09 quarterly letter to shareholders for The Oakmark Funds.
Bill Nygren oversees a number of funds in Oakmark Funds: The Oakmark Fund, The Oakmark Select Fund, and The Oakmark Global Select Fund. GuruFocus tracks the holding information of the Oakmark Fund. He made a major comeback after losing ground in 2008.
The YTD performances of the three funds are as follows:
Recently, Bill Nygren was interviewed by Bloomberg. During the interview, he commented on his investment style, primarily on the Select Fund, which is up 47%.
In The Oakmark Fund letter, Nygren hightlighted two stocks:
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Bill Nygren oversees a number of funds in Oakmark Funds: The Oakmark Fund, The Oakmark Select Fund, and The Oakmark Global Select Fund. GuruFocus tracks the holding information of the Oakmark Fund. He made a major comeback after losing ground in 2008.
The YTD performances of the three funds are as follows:
Recently, Bill Nygren was interviewed by Bloomberg. During the interview, he commented on his investment style, primarily on the Select Fund, which is up 47%.
In The Oakmark Fund letter, Nygren hightlighted two stocks:
Automatic Data Processing (ADP — $39)
ADP is the global leader in payroll processing and related employer services. ADP is generally viewed as one of the safest and most consistent growth companies. We concur with that view, and we believe that its cash-rich balance sheet and lack of debt add to its high quality. Because of that, investors have usually rewarded ADP with a premium valuation. Its price-to-earnings ratio has averaged in the mid-20s over the past 20 years, and it hit nearly 30 times earnings in 2007 when the stock reached $52. Like many extremely high-quality companies, ADP stock largely missed the post-March 9th rally, increasing by 22% while the S&P 500 increased by 58%. With the stock selling at only 16 times trailing earnings and yielding 3.4% (which is more than a 10 year government bond) we believe that this attractive company is now also an attractive stock.
Johnson & Johnson (JNJ — $61)
JNJ is the world’s largest healthcare company. Their products are highly diversified across pharmaceuticals, devices, diagnostics and consumer products. JNJ has been a highly admired company for a long time. Their expanding portfolio of innovative products that solve health problems for a growing and aging population has allowed them to increase both earnings and dividends at double-digit rates for several decades. That translated to a high price-earnings ratio and made JNJ one of many companies we admired, but couldn’t justify purchasing. In 2001, when JNJ first sold for more than $60, the company earned $1.91 per share, for a price-earnings ratio of over 30 times. Today, with expected earnings approaching $5 per share, the price-earnings ratio of just over 12 times is lower than JNJ’s average price-earnings ratio in any of the past twenty years. And its yield of over 3% is also near historic highs. We aren’t oblivious to the change that is coming in healthcare, but we believe that newly insured consumers will increase usage which will be an important offset to new pricing pressures. As often happens, a negative news environment has caused investors to worry about doomsday scenarios. This leads to a much lower stock price that we deem to be a bargain.
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