Apache (NYSE:APA), a U.S.-based oil and gas exploration and production company, was the largest detractor for the quarter. Despite exceeding third-quarter production and EBITDA estimates, the company’s share price declined due to falling energy and oil prices. Although commodity prices are intrinsically prone to short-term volatility, the normalized earnings power of individual companies is much more stable. We believe that the decline in Apache’s stock price is purely the result of cyclical factors and will not affect the company’s long-term progress and business value. Management reiterated 2019 guidance and at current price levels plans to return capital to shareholders via stock repurchases. Our investment thesis for Apache remains intact as we believe it is trading at a significant discount to our estimate of intrinsic value.
From Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio)'s fourth quarter 2018 Oakmark Global Select Fund shareholder commentary.
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