Oakmark Select Fund – Investor Class
Average Annual Total Returns 06/30/23
Since Inception 11/01/96 11.46%
Expense Ratio: 0.98%
Expense ratios are from the Fund’s most recent prospectus dated January 28, 2023; actual expenses may vary.
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 Select Fund (“the Fund”) returned 12.4% during the second calendar quarter, outperforming the S&P 500 Index’s return of 8.7%. Year to date, the Oakmark Select Fund has returned 24.7%, compared to the S&P 500 Index at 16.9%. This outperformance is noteworthy given the underperformance of value indexes this year, such as the Russell 1000 Value Index lagging behind the Russell 1000 Growth Index by 24 percentage points year to date through June 30, 2023. The performance of the Select Fund amid this backdrop highlights the advantage of our focus on intrinsic value, which often enables us to unearth undervalued investment opportunities that are not easily captured by traditional value metrics. The underperformance of traditional value is nonetheless creating new opportunities for us to invest in strong businesses at what we believe are cheap prices today.
Our largest contributing securities for the second calendar quarter were First Citizens BancShares and Lithia Motors, and our largest detractors were Warner Bros. Discovery and APA Corporation. From a sector perspective, our largest contributors were financials and consumer discretionary. The only sector that detracted from performance was energy. We believe the pullback in the energy sector has created an opportunity for long-term investors as many high-quality oil and gas producers are now selling for discounted multiples of their free cash flows. It follows that we added ConocoPhillips as a new position during the quarter. We did not eliminate any positions.
ConocoPhillips is one of the largest and most efficient exploration and production companies in the country. The company has an extensive resource base of high-quality drilling inventory in the U.S. and various international locations as well as a growing liquified natural gas business. In our view, the depth and quality of ConocoPhillips’s inventory is a competitive differentiator that is not fully captured in today’s share price. Over the next 10 years, we believe ConocoPhillips will be able to return more than 100% of its current market cap to shareholders via dividends and share repurchases while growing its production at a mid-single-digit annual pace. We believe ConocoPhillips is also among the best managed companies in the oil and gas industry and we are impressed by its history of accretive capital allocation under CEO Ryan Lance. The stock has meaningfully underperformed the broader market year-to-date and is an attractive addition to our portfolio.
We thank you, our fellow shareholders, for your investment in the Oakmark Select Fund.
The securities mentioned above comprise the following preliminary percentages of the Oakmark Select Fund’s total net assets as of 06/30/2023: APA 2.5%, ConocoPhillips 3.2%, First Citizens Bcshs Cl A 6.6%, First Citizens Bcshs Cl B 0.4%, Lithia Motors Cl A 7.0% and Warner Bros Discovery 3.1%. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.
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 Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000® companies with lower price-to-book ratios and lower expected growth values. This index is unmanaged and investors cannot invest directly in this index.
The Russell 1000® Growth Index is an unmanaged index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values. This index is unmanaged and investors cannot invest directly in this index
Because the Oakmark 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 stocks of medium-sized companies tend to be more volatile than those of large companies and have underperformed the stocks of small and large companies during some periods.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers and Harris Associates L.P. as of the date written and are subject to change and may change based on market and other conditions and without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.
Certain comments herein are based on current expectations and are considered “forward-looking statements”. These forward looking statements reflect assumptions and analyses made by the portfolio managers and Harris Associates L.P. based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Actual future results are subject to a number of investment and other risks and may prove to be different from expectations. Readers are cautioned not to place undue reliance on the forward-looking statements.
All information provided is as of 06/30/2023 unless otherwise specified.