Oakmark Global Select Fund - Investor Class
Average Annual Total Returns 06/30/18
Since Inception 10/02/06 8.20%
10-year 10.93%
5-year 9.10%
1-year 1.97%
3-month -2.20%
Gross Expense Ratio as of 09/30/17 was 1.19%
Net Expense Ratio as of 09/30/17 was 1.12%
Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. The investment return and principal value vary so that an investor’s shares when redeemed may be worth more or less than the original cost. To obtain the most recent month-end performance data, view it here.
The Oakmark Global Select Fund declined 2.2% for the quarter ended June 30, 2018, compared to the MSCI World Index, which returned 1.7%. However, the Fund has returned an average of 8.2% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 5.8% over the same period.
Apache, a global oil and gas exploration company, was the top contributor for the quarter, returning 22%. Rising oil prices during the quarter helped boost the company’s share price. Additionally, shares reacted positively to an increase in full-year production guidance and to first-quarter results, which beat production estimates. Apache’s well results have met and, in some cases, exceeded our expectations. Overall, we believe that the company’s valuation remains attractive, offering a compelling reason to hold the stock.
Daimler, the company best known for its passenger car business under the Mercedes-Benz brand, was the largest detractor for the quarter. During the quarter, Daimler issued a profit warning and indicated that it expects this year’s group EBIT to be slightly below 2017’s level. The company has faced some near-term challenges due to higher raw material costs, adverse effects from currency movements and minor difficulties with U.S. suppliers. Management largely mitigated these issues through cost cutting. However, Daimler now faces a threat of a tariff on vehicles imported from Europe to the U.S. The company also expects that reciprocal tariffs between the U.S. and China will impact its U.S.-built SUVs intended for delivery to China. Daimler’s management is evaluating methods to redirect auto shipments into China from other geographies as a possible work-around strategy to avoid tariffs. There is no certainty that tariffs will be imposed; the matter remains fluid. Emissions concerns have also put pressure on Daimler’s share price. To date, the company has recalled 750,000 vehicles to address emission issues, but has paid no fines. The company continues to insist that it did not illegally use its cars’ software to cheat emissions tests. On a positive front, Daimler held a capital markets day for the trucks division that highlighted the opportunity for margin expansion and management continues to explore the potential for separation of the group via Project Future. Despite the current geopolitical noise, Daimler still meets our operational performance expectations and is trading at a significant discount to our estimate of intrinsic value.
Geographically, 54% of the Fund’s holdings were invested in U.S. companies as of June 30, while approximately 46% were allocated to equities in Europe and the U.K.
We continue to believe the Swiss franc is overvalued versus the U.S. dollar. As a result, we defensively hedged a portion of the Fund’s exposure. Approximately 21% of the Swiss franc exposure was hedged at quarter end.
We thank you, our shareholders, for your continued support and confidence.
The securities mentioned above comprise the following percentages of the Oakmark Global Select Fund’s total net assets as of 06/30/18: Apache Corp. 4.3% and Daimler AG 6.4%. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.
The net expense ratio reflects a contractual advisory fee waiver agreement through January 28, 2019.
The MSCI World Index (Net) is a free float-adjusted, market capitalization-weighted index that is designed to measure the global equity market performance of developed markets. The index covers approximately 85% of the free float-adjusted market capitalization in each country. This benchmark calculates reinvested dividends net of withholding taxes. This index is unmanaged and investors cannot invest directly in this index.
Because the Oakmark Global Select Fund is non-diversified, the performance of each holding will have a greater impact on the Fund’s total return, and may make the Fund’s returns more volatile than a more diversified fund.
The percentages of hedge exposure for each foreign currency are calculated by dividing the market value of all same-currency forward contracts by the market value of the underlying equity exposure to that currency.
Investing in foreign securities presents risks that in some ways may be greater than U.S. investments. Those risks include: currency fluctuation; different regulation, accounting standards, trading practices and levels of available information; generally higher transaction costs; and political risks.
The discussion of the Fund’s investments and investment strategy (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) represents the Fund’s investments and the views of the portfolio managers and Harris Associates L.P., the Fund’s investment adviser, at the time of this letter, and are subject to change without notice.
All information provided is as of 06/30/2018 unless otherwise specified.
