Oakmark: A Winning Combination

02/21/2003 12:00 am EST


Walter Frank


"What can you say about a fund that, for the trailing one-, three-, five-, and ten-year periods, outpaces 99% of its peers?" asks Walter Frank. "Well, you could certainly make the connection that its investment strategy is a winner over the long haul." Here's the latest featured fund profile from the editor of The MONEYLETTER, a leading advisory for mutual fund investors.

In addition to its long-term performance, you can look at its relative performance in 2002 and draw the same conclusion. Oakmark Equity & Income (OAKBX ) returned –2%, compared to an 11% decline in its primary benchmark, the Lipper Balanced Fund index.

"Since day one, (Nov. 1, 1995), lead manager Clyde McGregor has been at the helm of this Oakmark balanced offering. Typically, the fund has about 60% of assets in stocks and the remainder in bonds, with the ultimate goal of high current income, and the preservation and growth of capital. The bond portfolio is generally heavy in Treasuries, with some agency debt and high-yield bonds thrown in. Over the past year, the fund has found inflation-indexed Treasuries to be an attractive value.

"The stock strategy is consistent with Oakmark’s value philosophy. In a nutshell, Oakmark buys companies they believe trade at a discount to their true business value. McGregor’s goal is to buy stocks when they are valued at no more than 60% of intrinsic value, and sell when they reach 90% or higher. Oakmark prides itself on its independence from Wall Street analysts; the firm relies on its own analysts, who do not have the possible conflicts of their Wall Street brethren.

"Top holding Synopsys (SNPS NASDAQ) has been in the portfolio for about a year and a half. McGregor likes the firm’s substantial cash position, lack of debt, and profitable business. Laboratory Corp. of America (LH NYSE) is a more recent addition to the portfolio, initiated in the fourth quarter of 2002. When investors reacted sharply to an earnings shortfall pre-announcement, Oakmark stepped in. Overall, unlike many balance funds, which stick to the large cap arena, Oakmark Equity & Income’s portfolio is full of small and mid-cap issues. Its strategy is strict, and they look to buy stocks for the long term. A winning combination."

Related Articles on