Why We Still Like Oakmark Select

Key Takeaways

• Oakmark Select OAKLX is a focused fund with about 20-25 stocks. You have 10% in Alphabet, but then you’ve also got about 35% in financials stocks.
• We put it in the blend category, but it’s a really somewhat quirky focused portfolio, and how you feel about it really depends on what time frame you’ve owned it.

Silver-Rated Oakmark Select

Russ Kinnel: We rate Oakmark Select Silver, but it’s really not a fund for everyone. It’s a focused fund with about 20-25 stocks. Bill Nygren looks at a variety of valuation criteria, and as a result you get an eclectic portfolio. On the one hand, you have 10% in Alphabet, aka Google, but then you’ve also got about 35% in financials stocks. So, we put it in the blend category, but it’s a really somewhat quirky focused portfolio, and how you feel about it really depends on what time frame you’ve owned it. I’ve owned it for a little over 15 years, and over that time it’s had about an 8.5% annualized return, top 16% of its category. For the year to date, it’s up about 11%, top 1%. For the three years, it’s up about 17%, top 13%. But for the five years, it’s got a 5% annualized return, bottom 8% of the category. For the 10-year period, it’s 8.2% annualized, which is a nice absolute number, but bottom third of its category.

Can You Weather Oakmark’s Turbulence?

You get the sense that it’s not just up and down for a year or two. Even the 10-year investors are unhappy, and the 15-year investors are happy. So, it really gives you a sense of the extremes you have to endure, because it is a quirky portfolio. With over a third in financials, obviously, you’re going to do well if financials happen to do well over that time period. But there are other times when it won’t do that well. So, you really have to know yourself. Are you a patient investor? Do you own investments that have had, say, a lousy three-year period, or do you sell them? If you sell them, don’t buy this fund. It’s not the fund for you. This is a focused portfolio that really bounces around a lot. And so, you truly have to have patience.

Bill Nygren is Here to Stay

You probably don’t want to make it your biggest holding either, because, again, it’s just a little unpredictable. Its returns over its entire existence have been great. But again, that doesn’t mean the next five years won’t be lousy. It’s certainly a possibility. So, you really have to keep that in mind before you buy this fund. I would also point out that Bill Nygren says he doesn’t plan to go anywhere, but at some point he may, a few years from now, retire. And then we’ll have to assess, do the comanagers have what it takes to really keep it going? I’m sure they would keep the style, but would they do as well as Nygren? That’s another issue that is out there. But it’s a fund I own, and I like it. But if you’re a patient investor, you might like Oakmark Select, too.

Watch “3 Great New Funds” for more from Russel Kinnel.