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Frequent Contributor

The demise of Oakmark

OAKBX - 2 stars

OAKLX - 1 star

OAKIX - 1 star

OAKEX - 1 star

What’s to say? All the managers choose from a list of companies generated by the Harris Associates brain trust. 

Looks like a serious, systemic implosion, just like Third Avenue.

Adding fuel to my suspicion that traditional “value investing” principles are dead.

30 Replies
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Explorer ○○

Re: The demise of Oakmark

Star ratings are risk adjusted with variability. The stars are also based on relative ranking. So, it likely means that Oakmark's funds have higher volatility during downturns.

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Frequent Contributor

Re: The demise of Oakmark

It means their risk adjusted returns are inferior.
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Participant ○○

Re: The demise of Oakmark

Portfolio metrics for OAKIX:  Average P/E 9.4, Price/Book 0.77, Price/Sales 0.39, Dividend yield 6.0%

I don't think I've seen valuation metrics this low in any fund I've owned. Obviously, Herro got caught owning deep-value stocks at the worst possible time. Given how far the market has tilted towards growth and against value over the past few years, I think Herro had a decent case for owning these stocks. And you can't blame him for not seeing the coronavirus coming. 

But there's no denying that he took a big risk, didn't do anything significant to mitigate the risk, and got burned.

I've owned OAKIX for a long time and am going to stick with it for now. Such a cheap portfolio has the potential for a pretty strong rebound. Once the market fully recovers, I'll look at how OAKIX did on the full cycle and decide whether to sell based on that.   

OAKMX seems to be a different case since its stocks aren't all that cheap on average. I guess Nygren thought they were cheap based on something beyond the usual metrics. But given that he's down something like 10% more than the overall market with a middling-valuation portfolio, it could be tough for him to climb back out of this hole. 

 

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Frequent Contributor

Re: The demise of Oakmark

Any fund you own compare to

VOO-US LC should be probably 70% on your stocks

International-VMVFX to capture 50/50 US/Inter.  I only want to be in EM

More gamble-QQQ, single stocks, 2-3 more funds

Thre rest - VG funds

Technology made information free and available and why many funds lag indexes and low ER < 0.35%

As we discussed before "value" isn't easy but not a good excuse when Wellington management did it at much lower ER.

=================

I owned OAKBX for about 8-9 years in 2000-2009 and never looked back. I watched Nygren for years, he held WM as his biggest holding for years stubbornly and came up on every show defending it when the market clearly told him he was wrong, this is not a manager I want to give my money to.

Pimco as some aspect of this too. If their top managers are wrong you will see several of their funds wrong too even the ones that are managed by others.

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Follower ○○

Re: The demise of Oakmark

Good point about Nygren's stubborn defense of holding onto WM back when it was clear to everyone else that the stock was tanking. In fact, as I recall, he didn't just hold WM, he bought more of it. He's really convinced by his theory of value, isn't he? I've been with OAKLX for 20 years and am ready to throw in the towel. OAKIX is another bad holding in my portfolio. Bah.

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Explorer ○○

Re: The demise of Oakmark

I waited 10 years too long to finally sell all of my Oakmark.


@PI wrote:

Good point about Nygren's stubborn defense of holding onto WM back when it was clear to everyone else that the stock was tanking. In fact, as I recall, he didn't just hold WM, he bought more of it. He's really convinced by his theory of value, isn't he? I've been with OAKLX for 20 years and am ready to throw in the towel. OAKIX is another bad holding in my portfolio. Bah.


 

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Participant ○○

Re: The demise of Oakmark

This full market cycle crap is another marketing tactic I fell for. Oh our fund is lagging for last 10 years but wait for full market cycle. And then downturn comes they do even worse.

Not again I am falling for it.

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Frequent Contributor

Re: The demise of Oakmark


@waffle wrote:

This full market cycle crap is another marketing tactic I fell for. Oh our fund is lagging for last 10 years but wait for full market cycle. And then downturn comes they do even worse.


That's one of the perplexing things about "value" funds. After a bull run where growth beats value, when the bear comes, value seems to crash harder than growth. Not in 2000-02, but definitely in 2008-09 and 2020. Look at the Third Avenues, Longleafs, Oakmarks, D&Cs, etc.

All asset classes have their day, as the Callan Chart shows, and I certainly do not suggest putting all one's eggs in one basket. Nothing wrong with having growth and value exposures, just like large cap and small cap exposures. But I have learned to avoid crazy extreme growth or extreme ("deep") value vehicles, favoring more "middle of the road" and low cost funds.

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Participant ○○

Re: The demise of Oakmark

To have value exposure, which funds or stocks are your favorites now or in the past?

I recently added etf VOOV Vanguard S&P 500 Value Index fund to balance all the growth LC exposure I have in balanced funds plus growth funds. I also added some sector etfs. I have VZ, MS, INTC, FITB, SNA and a few other value stocks

. What are others holding for value exposure?

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Frequent Contributor

Re: The demise of Oakmark


@Sheryldell wrote:

To have value exposure, which funds or stocks are your favorites now or in the past?

I recently added etf VOOV Vanguard S&P 500 Value Index fund to balance all the growth LC exposure I have in balanced funds plus growth funds. I also added some sector etfs. I have VZ, MS, INTC, FITB, SNA and a few other value stocks

. What are others holding for value exposure?


My value exposure comes from VG Global Wellington (VGWAX); plus I am still holding DODGX (having jettisoned two of their other funds a couple of months ago). DODGX is actually Top 4% (of LV category) during the last 3 months, and Top 50% over every time frame from 3 months to 15 years; so, I don't think it's as big a stinker as DODFX. While I have serious doubts about D&C, I am still holding onto DODGX. If it drops to the bottom half of its category for a >6 month period, it will probably be gone.

I used to have a number of other LV holdings, but they're all gone now. I do own a little JPM and RTX individually.

I'm waiting for some cash (401k and pension rollovers) to hit my IRA. When it does, some of that may find its way into Wellington or Wellesley.

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Contributor ○○○

Re: The demise of Oakmark


@FD1001 wrote:

I owned OAKBX for about 8-9 years in 2000-2009 and never looked back. I watched Nygren for years, he held WM as his biggest holding for years stubbornly and came up on every show defending it when the market clearly told him he was wrong, this is not a manager I want to give my money to.

Pimco as some aspect of this too. If their top managers are wrong you will see several of their funds wrong too even the ones that are managed by others.

 

OAKLX was quite popular at one point with Bill Nygren as the star manager for a long time.  Like many fund managers, his style eventually showed weaknesses.  I sensed similar trends even in FCNTX and FLPSX.  I am not deeply analytical and hated to painstakingly examine why the funds I owned did not perform as they should on a regular basis.

That is why I eventually dropped all the actively-managed funds, opted for low-cost index funds; and am very happy never to look back.  Just my case.


 

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Frequent Contributor

Re: The demise of Oakmark

DODGX is still pretty bad.  In the most popular category, there's no justification to lag the "stupid" index and give them a pass. Google and Microsoft (2 growth companies) are in their top 5 holdings.

Total Return % (06/16/2020)YTD1-Year3-Year5-Year10-Year15-Year
DODGX-12.44-1.534.236.1811.076.89
VFIAX(SP500)-2.3810.3610.8310.5213.158.75

 

Below is the last 10 years from PV(link).  DODGX has worse numbers(except one) in every column

PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
DODGX9.66% 16.52%40.55%-16.52%-29.16% 0.610.88
VFIAX12.07% 13.81%32.33%-4.99%-19.61% 0.851.34

.

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Participant ○○

Re: The demise of Oakmark

I have two  value investments - Berkshire B shares (BRK.b) and AMFFX (American Funds American Mutual)

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Follower ○○○

Re: The demise of Oakmark

I held both OAKMX and OAKIX as longrange funds from about 1994 until 3 years back. At that time, a desire to simplify the portfolio heading toward retirement and reduce the number of fund companies (and paperwork) forced me to reevaluate a number of past choices. Overall I did well with the funds and I certainly do not regret the time invested with them (though there were some long dry spells), but I haven't really missed them. And considering their recent slide, glad that I got out when I did.

Dirk

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Frequent Contributor

Re: The demise of Oakmark


@PI wrote:

Good point about Nygren's stubborn defense of holding onto WM back when it was clear to everyone else that the stock was tanking. In fact, as I recall, he didn't just hold WM, he bought more of it. He's really convinced by his theory of value, isn't he? I've been with OAKLX for 20 years and am ready to throw in the towel. OAKIX is another bad holding in my portfolio. Bah.


I had exited Oakmark well before the WM experience.

However, perhaps in defense of Nygren, this issue re banks was really borderline getting clipped by fraud.

Yes, WM was falling.  But these banks held most of the toxic mortgage stuff OFF-THE-BOOKS.  There was no visibility existeing to assess the extent of the risk.  Not easy to ascertain.  Many fund managers got trapped.  Bankers making announcements everything OK, and 14 days later declaring bankruptcy.  Once it was realized the amount that many banks had off-balance sheet, it was too late.

We needed a few banker CEO's in jail!

R48

 

 

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Participant ○○

Re: The demise of Oakmark

Now the excuse that company management did not tell us and we trusted them. Sure. Subprime crisis was not like covid. It was long time in making and people were discussing for long. I was in Los Angeles that time and it was a daily discussion among common folks much before it happened. Chuck Prince openly said it. Timing was not known but It was not a surprise to anyone.

And from what I heard, this was not the first time something like this has happened in Banking and real estate sector either.

 

And do not tell me these fund managers are naive enough to believe the rating agencies ratings.

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Follower ○○

Re: The demise of Oakmark

There were blogs devoted to the looming housing bubble bust, as far back as 2006 or 2007. They featured illustrative examples of over priced homes that had second mortgages and home equity loans drawn on their inflated valuations. Las Vegas, Sacramento, Miami, other areas were repeatedly singled out as especially egregious hot spots of irresponsibility, all areas of massive new housing construction. So, no, there was no excuse for Nygren to be so sanguine, fiddle in hand.

Meanwhile, all my international funds held up well today, but of course OAKIX along among them is down again. I have no idea what the heck Herro is up to, but that fund has become a dog.

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Frequent Contributor

Re: The demise of Oakmark

What little I've seen is that Oakmark and D&C fortunes are tied to value doing well, and, of course, that hasn't been the case in a while.  I've noticed (I think) a bit of resurgence in both when value was doing well recently.  Or maybe it's simply tied to financials?  I have a feeling they've just been in the wrong spaces.  Now is that an example of "sticking to their knitting" or pure stubbornness?  I'm not sure either family has forgotten how to invest or that the funds are inherently poor.  Certainly they HAVE made mistakes, and HAVE stayed with a losing formula.  The issue, in my mind, is whether the winds will change anytime soon.

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Participant ○○

Re: The demise of Oakmark

Waiting 12 years and ongoing for wind to change would be rather long stretch of underperformance.

It is better to switch to value after there is some certainty that wind has changed.

And it is ok to miss some 6 months of value outperformance while we for sure know.

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