Oakmark Fund - Investor Class
Average Annual Total Returns 12/31/19
Since Inception 08/05/91 12.48%
10-year 12.43%
5-year 8.82%
1-year 26.98%
3-month 11.33%
Gross Expense Ratio as of 09/30/19 was 0.92%
Net Expense Ratio as of 09/30/19 was 0.88%
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 Fund generated an 11% return during the fourth quarter, outperforming the S&P 500 Index’s return of 9% over the same time period. We were encouraged that investors rewarded several of our key holdings within the financials sector, our largest and top contributing sector during the fourth quarter. As discussed in this quarter’s market commentary, we continue to believe that our holdings within the financials sector offer an attractive risk/reward proposition, given their safer balance sheets and stronger competitive positions relative to recent history. We believe the prices of our financial holdings do not accurately reflect this dynamic. For the calendar year 2019, the Oakmark Fund returned 27% versus the 31% return for the S&P 500. Despite our strong absolute performance for the year, our long-term followers will know that we take little solace in this result, given our expectation to generate market-beating returns.
During the fourth quarter, we eliminated positions in Chesapeake Energy and Halliburton. These sales do not reflect a change in our view of the energy sector’s overall attractiveness. Instead, they were executed to recognize a tax loss and deploy the proceeds from the sales into more attractive holdings in the industry that offers stronger cash flow profiles, better balance sheets and more compelling risk-adjusted expected returns. The energy sector has significantly underperformed the price of oil over the past several years. Since early 2016, the price of oil has risen over 100%, while the returns from the S&P Oil & Gas Exploration and Production ETF (ticker: XOP) have dropped. Yet demand for oil has continued to grow and we expect a more balanced global supply outlook. Therefore, we believe that attractive opportunities remain in this out-of-favor industry.
We did not add any names to the portfolio during the fourth quarter, but we did take advantage of the relative price differential within Alphabet’s dual share class structure by swapping a portion of our non-voting Class C shares for voting Class A shares, which were offered at a slight discount to the non-voting shares. We believe that the voting rights afforded to the Class A shares should trade at a modest premium to the non-voting C shares—not a discount. We were happy to express this view by performing a like-kind exchange that didn’t trigger a taxable event.
Regeneron Pharmaceuticals and State Street were the best individual contributors for the quarter and the lowest contributors were Ally Financial and American International Group. No single position cost the Fund more than 28 basis points during the period. Our strongest contributing sectors were financials and health care and our lowest contributing sectors were energy and consumer staples, the latter of which is among our smallest sector allocations. For the calendar year, our best individual contributors were Citigroup and Apple, while our biggest detractors were Qurate Retail Class A and DXC Technology.
We thank our fellow shareholders for your investment and continued support of the Oakmark Fund.
The securities mentioned above comprise the following percentages of the Oakmark Fund’s total net assets as of 12/31/19: Ally Financial 2.9%, Alphabet Cl A 2.6%, Alphabet Cl C 1.2%, American Intl Group 2.1%, Apple 1.6%, Chesapeake Energy 0%, Citigroup 3.6%, DXC Technology 1.5%, Halliburton 0%, Qurate Retail Cl A 0.6%, Regeneron Pharmaceuticals 2.9%, State Street 2.8% and S&P Oil & Gas Exploration and Production ETF 0%. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.
Access the full list of holdings for the Oakmark Fund as of the most recent quarter-end.
The net expense ratio reflects a contractual advisory fee waiver agreement through January 27, 2020.
The S&P 500 Total Return Index is a float-adjusted, capitalization-weighted index of 500 U.S. large-capitalization stocks representing all major industries. It is a widely recognized index of broad, U.S. equity market performance. Returns reflect the reinvestment of dividends. This index is unmanaged and investors cannot invest directly in this index.
The Oakmark Fund’s portfolio tends to be invested in a relatively small number of stocks. As a result, the appreciation or depreciation of any one security held by the Fund will have a greater impact on the Fund’s net asset value than it would if the Fund invested in a larger number of securities. Although that strategy has the potential to generate attractive returns over time, it also increases the Fund’s volatility.
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.
Harris Associates L.P. does not provide tax or legal advice. Please consult with a tax or legal professional prior to making any investment decisions.
All information provided is as of 12/31/2019 unless otherwise specified.
