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Participant ○○○

OAKIX down 11.06% YTD

As of today, 2/25/2020 COB, OAKIX is down 11.06% YTD per M*. Am I the only one who still owns this fund?

Thoughts and recommendations are appreciated.

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Valued Contributor

Re: OAKIX down 11.06% YTD

It is a concentrated value fund, so some positions probably went sour. Herro tends to make big bets.

My diversified foreign funds are down from -2.75% to -6.19% YTD.

In my watch list that includes Asian and EM funds, nothing is down double-digits YTD.

YBB
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Participant ○○○

Re: OAKIX down 11.06% YTD


@yogibearbull wrote:

It is a concentrated value fund, so some positions probably went sour. Herro tends to make big bets.

My diversified foreign funds are down from -2.75% to -6.19% YTD.

In my watch list that includes Asian and EM funds, nothing is down double-digits YTD.


OAKEX - Oakmark International Small Cap Investor, which is also managed by Herro, is down 10.43 YTD per M*

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Contributor ○○

Re: OAKIX down 11.06% YTD

 

The OAKIX team utilizes a bottom-up selection process to buy stocks at deep discounts
to the team's intrinsic value estimates. Their high-conviction approach can cause OAKIX to severely lag its category peers at times. The fund's trailing returns for the 1 Yr and 3 Yr periods are bottom-decile in the Foreign Large-Blend category. However, trailing returns for longer periods (10 Yr, 15 Yr) are top-decile. Intestinal fortitude is required to hold OAKIX and investors should plan on making a long-term commitment to the fund.

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Valued Contributor

Re: OAKIX down 11.06% YTD

As for what to do now, ride it out, but when it has good times again, reduce exposure and switch to a better diversified foreign fund. IMO.

YBB
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Participant ○○○

Re: OAKIX down 11.06% YTD

OAKIX is now down 19.04% YTD (to anyone out there who still owns this fund).

Per M* -- Oakmark International can be hard to hold, but its veteran leader, solid team, and disciplined execution make it worthy of a Morningstar Analyst Rating of Gold.

I hold it in my taxable account with golden handcuffs, taxwise. So as yogi said, I'll ride it out.

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Explorer ○○○

Re: OAKIX down 11.06% YTD

A very naive question but I will ask anyway as I have learned a lot in these forums,

"As for what to do now, ride it out, but when it has good times again, reduce exposure and switch to a better diversified foreign fund"

Is there not opportunity cost to holding such funds? I did the same with OAKBX.

Why not switch now? What is the rationale? Or is it the very human bias of hope and not admitting mistake?

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Participant ○○

Re: OAKIX down 11.06% YTD

Funny this should generate a thread... OAKIX and OAKEX are (sadly?) my two primary international equity funds ... have been for several years.  i think they were improving somewhat prior to the CV plummet.  EM fund VMMSX - in the same boat tho only more recently... I haven't done anything with the OAKMK holdings - and i share the same question re: opportunity cost - as per @waffle 's question - which i think is entirely reasonable given the extremes.

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Participant ○○

Re: OAKIX down 11.06% YTD

@PN Same boat, basically... only I have the pleasure of OAKIX AND OAKEX in my Taxable... biggest losers in the port.  Not the best consolation I know.  

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Valued Contributor

Re: OAKIX down 11.06% YTD

I don't own OAKIX but just analyzing it for the benefit of those who own it intentionally or unintentionally.

It is important to know what one owns.

OAKIX is absolute-value, high-conviction, concentrated international fund. It builds positions in companies that are unloved/hated/out-of-favor. Its top 10 holdings all have double digit declines YTD and top 25 have YTD declines in all but 2 holdings. Of course, if one is losing sleep over it, switch into a more normal international fund. For those who got into it knowing how the fund works, stick with it through this rough patch and make a switch when things get better - that is what I suggested in a prior post.  But the worst thing would be to sell deep-value OAKIX at a loss, buy a growthy fund like VWIGX which subsequently may also collapse due to market conditions - that would be a very expensive lesson on opportunity-costs.   http://portfolios.morningstar.com/fund/holdings?t=OAKIX&region=usa&culture=en-US

Charts

YBB
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Participant ○○

Re: OAKIX down 11.06% YTD

@yogibearbull  Thanks!  Excellent analysis and view.  As a holder, the smart money move - and I guess in line with either of these fund's objective and approach (manager Herro's I guess) - would be to hold here.  Theoretically the patience is eventually rewarded, if the $ can be left in to ride for awhile - rather than the proverbial selling at the lows...  Hindsight tho, FWIW (which is little) - i wish i had paid more attention to how this particular fund 'works' -one that was an FA recommendation a few yrs ago  - because I would have known to have vetoed this choice for or bailed on it with some gains  in preference for - as you say - a 'more normal'International fund.  

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Explorer ○○○

Re: OAKIX down 11.06% YTD

It is like in bottom of its category for last 5 years.

98 percent of funds are doing better than it in its category -US Fund Foreign Large Blend.

Why does M* categorize it as blend and not value?

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Participant ○○

Re: OAKIX down 11.06% YTD

@waffle   agreed!  fair question, i'd like to know that as well. Hmm, 5-years in the bottom percentile of its category ?  I mean yeah it does beg the question, how long is long enough to give a fund a chance to show you the value or yield of having held it before deciding to cut it loose.  How can it be a certainty that this thing doesn't continue to tank for another five years.  

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Participant ○○○

Re: OAKIX down 11.06% YTD

M* is frequently way too slow changing its ratings.  They had Sequoia and Fairholme rated Gold after their poor showings.  Probably took several negative articles in the WSJ to get M* to change it.  There is nothing at Oakmark that should be Gold or Silver.  From my perspective there is no reason to buy any Oakmark fund.  And as others have said, you may want to hold for a rebound.  When if does.....I would sell pronto.  No reason to own a dedicated international fund in my opinion.  But if I did, I would simply buy the index.

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Participant ○○

Re: OAKIX down 11.06% YTD

Am with you on that.  It's the hold time for the rebound that is the question, whose answer is apparently anyone's guess for the near future.

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Explorer ○○○

Re: OAKIX down 11.06% YTD

If you go to the Morningstar page for OAKIX, you will see the fund flows underneath the price chart. So, for instance you see that investors were putting money into this fund in mid 2013 and early 2018 - AFTER periods of very strong outperformance. And you'll see that investors were selling this fund in late 2018 - AFTER a period of strong underperformance.  

Investors who make these sorts of buy and sell decisions get more of the downside and less of the upside of the fund's returns. 

So of course you want to avoid this. That is the basis of advice to hold. It is good advice on average, but of course it could be wrong in this case. 

Many investors would probably be better off to avoid concentrated, volatile funds like OAKIX.

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Explorer ○○○

Re: OAKIX down 11.06% YTD

I own OAKIX now, and have for many years. I also owned SEQUX during its Valeant debacle back in 2014-15. It's an interesting point of comparison: concentrated, gold-rated funds with strong long-term returns, having a bad stretch of underperformance. Hold or sell? 

I think the SEQUX example shows that Morningstar's gold ratings are of limited value. There were plenty of red flags back in 2014. I noticed them myself before SEQUX headed down. I didn't sell as soon as I should have. Honestly that was more because I was blinded by the fund's past returns than by Morningstar's gold rating. But I think the problems at SEQUX were clear enough that Morningstar should have flagged them earlier. 

IMO the OAKIX situation is quite different. For one thing, SEQUX had more than 20% in just one highly controversial stock - Valeant. I had read articles critical of its business model and agreed that it didn't seem to be a wise investment. Two SEQUX board members had resigned over the issue. Furthermore the managers most responsible for Sequioa's long term performance had fully retired from active management by 2014. There were plenty of red flags for SEQUX, before it tanked. 

As far as I know, OAKIX doesn't have any similar red flags. So for the moment I'm reacting differently for the two cases - I did sell SEQUX after its first leg down, but I'm not planning to sell OAKIX.  Of course, I could be wrong. 

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Participant ○○

Re: OAKIX down 11.06% YTD

Dilemma is down to not if, but when...i.e. whether to wait for a better price to trade out of OAKIX/OAKEX for more conventional/less volatile Int'l exposure.  In these funds mgr Herro has favored Financials which of course are being hammered more than overall mkt.  Also their mgt. style, very value-intensive has been out of favor for a dozen years or so.  Does anything turnaround soon on either front?  My holdings -and i guess fortunately in these -are just abt. 5% of total PF in Taxable account. I'd rather be in something of a less concentrated more normal, diversified Foreign fund(s) at some point.  Take some double digit losses in these now? ( i think i've given them enough 'rope') or  hold off for a bit and hope to see some recoup of recent losses at least before going elsewhere for this sector.  The decision on a better fund alternative is far less difficult.  I'd be okay with a strong global allocation fund. To lesser extent am bothered by VMMSX/ Emerging Mkts but less so than these;  and yes, the OAK M* ratings are outdated IMO.

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Explorer ○○○

Re: OAKIX down 11.06% YTD

OAKIX is down -27% YTD. It is getting attractive.

It went down more than any of my funds. I do not have OAKIX and I sold OAKBX last week.

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Participant ○○○

Re: OAKIX down XX % YTD

New M* article discusses OAKIX -

https://www.morningstar.com/articles/972258/these-international-stalwarts-are-better-than-they-look-...

I've reduced my position a little. Now that the entire market is down, I can use tax loss harvesting to reduce capital gains.

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