Markets don’t like uncertainty, and it looks like there is going to be less uncertainty about fiscal and monetary policy than there has been in years, suggests Bob Carlson, editor of Retirement Watch.
But that doesn’t mean everything is going to be rosy and we should abandon our insistence on having a margin of safety. Low interest rates, coupled with the strong stock returns of the last few years, mean investment returns for the coming years are likely to be below average.
I’m not forecasting a deep, long bear market. I believe the Fed will do everything it can do prevent that. But stock returns aren’t likely to continue at recent levels. In addition, the wide dispersion between winners and losers will continue and might become even broader.
Oakmark (OAKMX) is a recent addition to our model portfolio; the fund focuses on a relatively small number of companies and tends to hold a stock for a long time.
Unlike the other funds, OAKMX is a value investor, rather than a growth investor, though the fund has its own definition of value
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investing and often owns stocks that aren’t in most other value stock funds.
The fund recently held 59 stocks and had 32% of the fund in the 10 largest positions. The top holdings in the fund were Alphabet (GOOGL), Facebook (FB), Netflix (NFLX), Ally Financial (ALLY) and Comcast (CMCSA).
Oakmark was one of the top-performing stock mutual funds for a long time. It still is among the top 13% of funds over 15 years, according to Morningstar and has been among the top half over the last 10 years.
But performance lagged in recent years as returns for large company growth stocks, especially technology stocks, overwhelmed returns for all other stocks. But late in 2020, Oakmark began to surge, and the surge continues so far in 2021.
For a while, I have been expecting the market to rotate away from large company growth stocks, and it looks like it finally is happening. OAKMX returned 24.10% over three months and 16.47% over 12 months.
