Oakmark Global Select Fund - Investor Class
Average Annual Total Returns 03/31/17
Since Inception 10/02/06 8.40%
10-year 7.61%
5-year 11.19%
1-year 20.96%
3-month 5.83%
Gross Expense Ratio as of 09/30/16 was 1.15%
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 returned 5.8% for the quarter ended March 31, 2017, compared to the MSCI World Index’s 6.4% return. Most importantly, the Fund has returned an average of 8.4% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 5.0% over the same period.
Richemont, the world’s second-biggest luxury goods company, was the largest contributor to performance for the quarter, returning 19%. Investors reacted positively to the company’s third-quarter sales update, which showed the first period of growth since the first half of 2015. Much of the improvement was driven by a recovery in greater China (PRC, Hong Kong and Macau), where demand appears to be normalizing following two-plus years of contraction after a government crackdown on gifting reduced demand for luxury watches. With the number of millionaires globally growing at a healthy rate and Richemont’s ownership of one of the most valuable portfolios of luxury brands, including Cartier, Van Cleef and Piaget, we believe Richemont continues to be an attractive investment for our shareholders.
Apache, a U.S.-based leading oil and gas exploration and production company, was the largest detractor for the quarter, declining 19%. Shares reacted negatively to the company’s 2017 production guidance, which was below expectations despite increased capital spending. Volumes are expected to decline in the first half of 2017 due to temporary maintenance as well as the lagging impact of capital expenditure reductions in 2016. However, production is expected to improve in the second half of 2017 primarily due to growth from the company’s new oil and gas discovery (Alpine High) in the Permian Basin. In addition, the management team is focused on maximizing shareholder value through lean operations and careful capital allocation. Although Apache’s near-term operating environment may be challenging, we believe its long-term prospects are promising and that the company is well positioned to benefit from an eventual recovery in oil prices.
During the quarter, we sold our position in Samsung Electronics and purchased shares of Willis Towers Watson. Samsung’s stock price has performed well recently due to strong results from the company’s memory business. Although Samsung remains well positioned, we decided to reinvest the proceeds into more attractive opportunities. Willis Towers Watson is the product of the 2016 merger between Willis Group and Towers Watson. At the time of the merger, Willis was the third-largest insurance broker in the world, operating in approximately 120 countries, while Towers Watson was a leading provider of risk management and consulting services. We believe the combined group will be able to offer an enhanced value proposition to its clients and also generate significant operational and tax-related synergies. Given that the stock currently trades at 11x forward operating earnings and that the company produces a healthy free cash flow yield, we find that Willis Towers Watson has an attractive risk-reward profile.
Geographically, 47% of the Fund’s holdings were invested in U.S.-domiciled companies as of March 31, while approximately 53% were allocated to equities in Europe.
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 10% 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 03/31/17: Cie Financiere Richemont SA 4.6%, Apache Corp. 4.1%, Samsung Electronics Co., Ltd. 0% and Willis Towers Watson PLC 1.2%. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.
Click here to access the full list of holdings for the Oakmark Global Select Fund as of the most recent quarter-end.
The MSCI World Index (Net) is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets. This benchmark calculates reinvested dividends net of withholding taxes using Luxembourg tax rates. 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 03/31/2017 unless otherwise specified.
