Sometimes even Old Masters go through a funk. In an August letter to his shareholders, Oakmark Select manager Bill Nygren laid it on the line. Housing-related favorites such as Washington Mutual and Pulte Homes were getting pummeled. Other holdings in the 20-stock portfolio, like McDonald's and Viacom, weren't doing much better. Calling his fund's performance since the end of the second quarter "dreadful," Nygren said the preceding weeks had been "as frustrating as any period" in his career.
The frustration has only continued. All told, the fund has lost more than 12% in 2007, badly lagging the S&P 500. As a patient and disciplined value investor, though, Nygren still sees plenty of promise in his $5.3 billion fund's lineup. "We believe that, in general, the names in the portfolio are better values today than they were six months ago," he says.
That spells opportunity to buy a top-notch fund while it's down. In fact, Nygren wrote in his letter that he had just put more of his own money into the fund. "If people think we're as stupid as our one-year record makes us look, then they shouldn't own our fund," Nygren says. But for investors who think the firm's ten-year record is more indicative, he says, "this could be a very interesting time to make new or additional investments in the fund."
We agree. Despite the recent turmoil, Oakmark Select has gained nearly 13% a year over the past ten years, trumping the S&P. With conscientious management, a reasonable 0.99% expense ratio, and the promise of patience, the fund offers plenty of reasons for investors to think brighter days lie ahead.