Stock-Picking Is Still Oakmark's Strength
Longtime successful managers Bill Nygren and David Herro anchor this firm's stellar lineup of funds.
Katie Reichart: The Oakmark Funds, advised by Harris Associates, have a successful history dating back to 1991.
The team is proven. CIOs Bill Nygren for U.S. equity and David Herro for international equity have successful records spanning decades. Their eventual retirements down the line will be a loss, but the firm has named comanagers on their strategies, which is encouraging. Although the firm's analyst bench has had turnover through the years, the team overall is experienced. The analysts, who are generalists rather than being boxed in by certain sector-level focuses, have free rein to dive deeply into company-level research, Oakmark's forte. The firm started an associate analyst program in recent years to spot promising candidates early on and grow talent internally rather than just hire experienced analysts from elsewhere, which should continue to strengthen the team's depth.
The Oakmark Funds succeed with a patient, focused, and flexible value approach. The team aims to buy companies trading at a discount to their estimated intrinsic values, with a level of analysis that goes well beyond traditional price multiples. Management teams with an owner mentality are a must. To ensure stringent vetting of ideas, there are two investment committees comprised of senior team members--one for U.S. equities and one for international equities. These committees must agree to add stocks to an approved list from which managers then draw ideas. Regular team-level devil's-advocate debates help challenge portfolio holdings and ensure rigorous analysis.
The Oakmark strategies are no benchmark-huggers; stock-picking drives their success. The portfolios are focused, ranging from 20-65 names. That helps picks stand out, though it also means the strategies' performance patterns aren't always predictable.
Oakmark Funds include seven strategies: U.S. equity, international, global, international small cap, and equity income. There are also two "Select" funds that are more concentrated versions of the U.S. equity and global strategies, and those tend to be more volatile than their more diversified counterparts.
Over time, the strategies have thrived through strong performance, though by nature, returns can be boom or bust for periods. So, investors should have a long time horizon. Oakmark has closed some strategies in the past as assets have risen, which works in investors' favor, though fees are middle-of-the-road.
Katie Rushkewicz Reichart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.