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Destripando el Oakmark Global

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Destripando el Oakmark Global
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Destripando el Oakmark Global
8 / 10

Re: Destripando el Oakmark Global

Crazy, creo que la hice desde fondotop, que permite cambiar la moneda del fondo (entre dos opciones). Simplemente trace la gráfica de uno y otro de manera independiente y tomé nota de hasta que nivel llegaba el gráfico de crecimiento. La verdad es que con esta mini-corrección se piensa uno lo de entrar eh ??



Re: Destripando el Oakmark Global

Ah ok, probare a ver, thanks. Lo digo porque me extrañaba que al compararlos en mornigstar el Dividend iba muy por delante.
Lo cierto es que buscaba un RV global para acompañar el Mutual Discovery que ya tengo, y estaba viendo que opciones habia. El Harris es de los que mas me gusta pero en cuanto a rentabilidad no es de los mejores, mi idea es compararlo con otros y si la diferencia porcentual no es demasiada pillarlo.


Carta trimestral de Bill Nygren

Comparto la carta de uno de los inversores más seguidos por la comunidad Value. 

“An expert is one who knows more and more about less and less until he knows everything about nothing.”
  -William Mayo, a founder of Mayo Clinic

We all know the story of Tiger Woods learning to imitate his father’s golf swing at just six months old. So last month, when Gary Woodland won the U.S. Open, it was a victory for all the late bloomers who played many sports while growing up. In high school, Woodland played shortstop on a championship baseball team and he was a Division II college basketball player. In “How Basketball and Baseball Helped Gary Woodland Master Golf,”1 The New York Times reported, “a funny thing happened to Woodland as he was supposedly wasting his time on other sports instead of focusing all of his attention on golf. He learned many transferable skills and life lessons that made him a better player and, he believes, a more grounded and well-rounded person,” and, “Being at the plate or free-throw line with the game on the line taught Woodland how to embrace the pressure and discomfort instead of succumbing to it.” I can almost hear the sighs of relief from parents who’ve been told that their multi-sport children have already fallen too far behind to excel at a specific sport. 

Like Woodland who benefitted from being a generalist in sports, we at Oakmark benefit from having investment analysts who are generalists. Although investment firms generally assign their analysts to specialize in just one industry, we believe that analysts who examine a wide breadth of companies provide far more value to the investment process than those who focus on one narrow industry.

When analysts come to work at Oakmark, we have already confirmed that they share our long-term value investment philosophy. If they don’t, they don’t survive the interview process. From day one, they can look within any industry for businesses that are undervalued, growing and run for the benefit of shareholders. We believe that level of freedom allows us to attract and retain more talent, speeds development, improves research department flexibility, and most importantly, results in the robust debate our process requires. Because our analysts look for the most compelling values wherever they may lie, it is quite common that multiple analysts will follow stocks in the same industry. This enables each analyst to provide critical feedback about the others’ investment ideas. For example, consider what happens when an Oakmark analyst presents a new bank stock. Because most of our team members either cover one of our bank holdings or have considered recommending one we don’t own, they can each contribute to a debate of the new idea’s investment merit.

In the book Range: Why Generalists Triumph in a Specialist World2, author David Epstein argues that many fields have gone so overboard with specialization that generalists are now the more valuable problem solvers. Epstein states that “highly credentialed experts can become so narrow-minded that they actually get worse with experience, even while becoming more confident—a dangerous combination.” Through numerous examples, Epstein differentiates between “kind” and “wicked” environments. He says a “kind” learning environment is defined by psychologist Robin Hogarth as one where “patterns repeat over and over, and feedback is extremely accurate and usually very rapid.” Specialists can thrive in “kind” environments. As a simplistic example, learning to play tic-tac-toe is the epitome of a kind environment: The rules are fixed, patterns repeat and feedback is both accurate and rapid. Without study, simple repetition quickly produces an unbeatable player who could tie for World Champion.

Unfortunately, most of life occurs in less kind learning environments. Hogarth calls the opposite of a kind environment “wicked.” As Epstein relays, “In wicked domains the rules of the game are often unclear or incomplete, there may or may not be repetitive patterns and they may not be obvious, and feedback is often delayed, inaccurate, or both.” On the continuum between kind and wicked environments, investing seems to be much closer to the wicked end. 

We can cite business conditions that often lead to successful investments, but we can also show examples when those same conditions led to failures. Bad news for a company typically pushes its stock price down, but sometimes, when the news has already been thoroughly discounted, the announcement can actually make the stock price go up. We can buy a stock that looks unbelievably cheap and then the stock price drops even lower. Investors with less patience or conviction will often give up before the pendulum swings and the positive results begin. 

Our own value approach, which has been successful over the long run, can still go through difficult periods, like today, when our five-year trailing performance lags behind the market averages. Though we’ve been through these periods before and have seen the rebound that often follows, we also know that “past performance is no guarantee of future results.” Becoming successful at investing has very little in common with becoming successful at tic-tac-toe. The learning environments are about as different as they could be.

To demonstrate the value of generalist thinking in wicked environments, Epstein cites the story of a chemist at Eli Lilly who posted some questions online that had baffled Lilly’s chemists. Relatively quickly, solutions came rolling in—most from individuals who worked in unrelated fields. The project was so successful that it was spun off into a separate company, InnoCentive, which enables experts in any field to post complex problems online and provide rewards for anyone who can solve them. A little more than one-third of the posted problems have been completely solved—an impressive statistic, considering teams of specialists had been stumped! According to Epstein, InnoCentive also discovered that the broader the backgrounds are for those who try to solve the problems, the more likely it is that the problems are answered.

Investing involves a search for solutions to complex problems—a “wicked” environment not well suited to extreme specialization—yet in a typical investment firm, one analyst will be responsible for one industry. Let’s say an investment firm has an analyst assigned to the chemical industry. That individual will know a tremendous amount of detail about a dozen chemical companies. Rank ordering those 12 companies based on business quality is that individual’s forte. Knowing the expected news flow of the next six months is also an important part of that job. But this individual is focused only on chemical companies. A question such as “Is DuPont a better business than credit card issuer Capital One?” would probably be met with a blank stare. The more important question, “Which is likely to be the better long-term investment?” is one an industry specialist is not trained to answer.

At Oakmark, we believe it is easier for our generalists to acquire specialist-level knowledge than it is for a specialist to learn how to place that knowledge into a useful context. When our generalists need deeper knowledge in a specific industry, they will search for relevant articles, listen to podcasts, talk with experienced management teams, consult with experts in the field and interview the industry specialists at brokerage firms. Compared to my early career, the internet has made it much easier to access specialist knowledge. However, knowing what to do with all of that information—which is the domain of the generalist—remains as difficult now as it was then.

Having generalists also makes Oakmark a more flexible company that can question its own assumptions. When we believe that a stock we own would benefit from a fresh look, our director of research will assign it to a different analyst. Because our analysts have all studied companies from many different industries, this is nothing out of the ordinary for them—and a fresh set of eyes often produces a valuable new perspective. Imagine how different that would be if you asked the analyst who has spent a career following 12 chemical companies to suddenly pick up coverage of, say, computer giant IBM. It simply wouldn’t work. In addition, our “devil’s advocate” process relies on generalists. Each of our analysts thinks about every stock we own. If they disagree with a holding, they present the sell case on a stock someone else covers. At specialist firms, the auto analyst isn’t thinking about—and might not even be aware of—the firm’s cable TV position. Presenting the case against it would be nearly impossible.

A final advantage of the generalist model is that it provides analysts with better training for becoming portfolio managers. All of Oakmark’s current portfolio managers previously worked as generalist analysts. If industry specialists want to become portfolio managers, it is an open question as to how adept they will be at making cross-industry comparisons. Yet every day, a portfolio manager has to make judgments like whether Alphabet is more attractive than Ford or whether Citigroup is a better investment than Merck. Our analysts constantly make those judgments as they decide which companies to recommend for purchase. For a specialist, that’s a brand new way of thinking. 

For every prodigy like Tiger Woods there’s a Gary Woodland whose skills were honed from generalist experience. So if your child enjoys playing soccer, baseball and basketball, but the baseball coach says it’s time to drop the others, you probably won’t ruin your child’s life by ignoring that advice. And as you think beyond sports, remember Epstein’s conclusion that the more uncertain the environment, the more likely it is that a generalist will have greater success than a specialist. We believe Oakmark’s track record shows that our shareholders benefit from the broad perspective of our analysts. I believe our work environment also benefits: Woodland credited the breadth of his background for making him more coachable, grounded and well rounded. Those same traits in our analysts make Oakmark a better place to work.


¿Dónde se puede contratar Oakmark desde España?


Saben si ya es contratable en alguna plataforma española???



Carta trimestral de Nygren: What is smart at one price is stupid at another."

What is smart at one price is stupid at another."  -Warren Buffett 
The S&P 500 returned 31% in 2019. With the exception of its 32% return in 2013, this was the S&P 500’s largest annual gain in the past 20 years. The Oakmark Fund produced a return of 27% for the year and Oakmark Select returned 28%. Compared to almost anything other than the S&P 500, those are very good numbers and exceeded almost all beginning-of-the-year predictions for what a mutual fund would return in 2019. Still, for the third straight year, both Oakmark and Oakmark Select returned less than the S&P 500. 

We are encouraged that the past quarter showed signs of a turn—both funds outperformed a strong market. But given that we and our shareholders expect our Funds to outperform the S&P 500 over the long term, we wanted to focus this report on our relative performance as opposed to our strong absolute performance. We hope this will help our shareholders answer this important question: “Did Oakmark trail because value investing is, as a strategy, underperforming? Or is Oakmark doing a poor job of implementing its strategy?” 

To answer these questions, let’s first look at how value performed in 2019. You’ve probably heard of the “Dogs of the Dow” theory, which states that the 10 cheapest stocks in the Dow Jones Industrial Average (based on dividend yield) tend to outperform that index over the following year. And from 2000 through 2018, this held true: the “Dogs” outperformed the Dow by an average of 150 basis points per year. But in 2019, the 10 “Dogs” underperformed the other 20 stocks in the Dow by a whopping 1770 basis points, returning 13% versus 30%. 

Using another value measure, if, at the beginning of 2019, you had bought the 50 cheapest S&P 500 stocks based on price-to-book value, you would have underperformed the rest of the S&P 500 by over 500 basis points for the year. Similarly, if you bought the 50 stocks with the lowest expected 2019 EPS growth, your portfolio would have underperformed the 50 highest expected growth stocks by 830 basis points over the year. Consistent with that, the Russell 1000 Value Index, an index composed of lower priced stocks relative to earnings and book value, underperformed the Russell 1000 Growth Index by 990 basis points in 2019. Given these results, it’s no surprise that Morningstar reports1 that large-cap value funds as an aggregate underperformed large-cap growth funds by 690 basis points in 2019. 

Undoubtedly, we made our share of mistakes at Oakmark in 2019. But the data suggest that our much bigger problem was that investors were not very concerned about valuation levels. Though this can be frustrating, it also gives us the opportunity to start the year with a portfolio of stocks that our research suggests is at a larger discount to the market than is typical. 

To examine these opportunities, let’s take a step back and compare U.S. equities with the bond market. Many investors think a 10-year U.S. Treasury bond is a riskless investment because the U.S. Treasury not paying its debts is unthinkable. And if you rule out default, except for inflation risk, it would be risk-free—but only if it is held to maturity. However, if you hold that bond for a shorter period, its total return will be a combination of its coupon yield plus the change in value caused by interest rate changes. 
For example, if interest rates rise to just 2.1%, a 10-year Treasury bond that currently yields 1.9% will generate a negative one-year return. And good luck to those pension funds relying on 30-year Treasuries repeating their 7% annualized return from the past decade. That will only happen if their yield, starting at 2.3% today, goes to negative 1.2% a decade from now. I guess nothing is impossible, but this outcome seems highly unlikely. Fixed income investors who ignore the impact of interest rate changes have a lot in common with equity investors who ignore the impact that movement in P/E multiples have on stock prices. 

I sometimes get frustrated with legal edits that don’t allow me to say things like, “Alphabet is a great business.” Despite the company’s demonstrably superior financial metrics, that statement is an opinion, not a fact. So, when my writing comes back from editing, it is often filled with new insertions like, “we believe,” “in our opinion,” “it could be the case” and so on. At times, it feels as if I have to write, “Two plus two, in our opinion, equals four.” (To be clear, our lawyers aren’t to blame. Rather, it’s our industry’s history of bad actors who stretched the truth that have led to increased regulation.) Because of this, I’m excited that I can write something definitive about stock prices: a stock’s price always equals its price-to-earnings ratio times its earnings-per-share, or P= P/E x EPS. 

As value investors, we pay close attention to P/E and base most of our investments on the premise that a stock’s current P/E ratio is too low. If a stock moves to what we believe is a fair multiple, the result is a higher price. Occasionally, we have a strong non-consensus view on earnings potential, such as when we believed that Baxter’s new management team had an opportunity to nearly double margins. Likewise, as the 2008 recession came to a close, we believed that earnings would get back to “normal” over our seven-year time horizon—a decidedly more positive outlook than most investors had at the time. 
Usually, however, we don’t quarrel much with consensus earnings forecasts. Instead, we believe that our stocks will benefit from higher P/E multiples. That was our view in 2000 when we avoided technology stocks that were selling above the S&P 500’s 30 times multiple and instead owned single-digit P/E stocks, such as consumer packaged goods, industrials and financials. Today, you can see this same logic at work in our bank and cyclical holdings, with many selling at single-digit P/Es, and our avoidance of utilities, consumer packaged goods and REITs that trade at P/Es in the 20s. 

Although the formula P=P/E x EPS highlights that estimating future P/E is just as important as forecasting EPS, investors typically alternate being obsessed with one factor and then the other. The collapse of the tech bubble in 2000 was a time when investors stopped paying higher and higher prices for the fastest growers and quickly pivoted to low P/E stocks. And today, just like during the height of the tech bubble, analysts are focusing much more on a company’s earnings than on the company’s appropriate P/E multiple. It’s not the analysts’ fault. After all, their job is to earn commissions from their clients, and today, most of their clients are paying them to focus on earnings predictions. 

But this focus on earnings instead of valuation has led to some very—shall we say—interesting analyst reports, including the following “takes” we’ve seen on our own holdings: 
  • One analyst wrote that he believed, as we do, that DXC’s new CEO will restructure the company and largely eliminate the quality gap between DXC and its public peers over the next three years. Yet, in the same report, the analyst set the company’s target P/E at a 30% discount to its peers—unchanged from its historical average, despite its improved competitive stance.
  • An in-depth report on Lear highlighted the company’s many advantages compared to other auto parts businesses that sell for between 5 and 11 times EBITDA. But then the analyst computed Lear’s new target price using a multiple of 4.8 times EBITDA. Why? That was left to the reader’s imagination.
  • A report on CBRE Group touted the company’s improved business mix. Over the past few years, CBRE’s maintenance outsourcing segment has grown rapidly compared to its more cyclical brokerage segment—historically the larger part of the business. Importantly, the market tends to value recurring income, like that from service businesses, at a much higher P/E than businesses based on one-time transactions. Nevertheless, this still concluded that CBRE is fairly priced because its current P/E is approximately at its 15-year average.
  • A report on Constellation Brands kept the company’s target P/E the same—at 17 times—despite the company’s recent purchase of a large interest in Canopy Growth Corporation. Canopy’s losses reduce Constellation’s reported EPS by about $0.85 so the analyst is inadvertently valuing Constellation’s Canopy investment at negative $-14 per Constellation share, despite its market value being positive $14.
  • Another report noted that big banks are safer and more competitively advantaged today than at any time in recent history. Yet it concluded that these banks are fully valued at their current price of 10 times earnings—which is a P/E roughly the same as their 30-year average. The report never explained why the improved business fundamentals shouldn’t be rewarded with a higher P/E multiple.

The largest industry weighting in our portfolios, financials, demonstrates why we believe our Funds will benefit when valuations become a bigger determinant of prices. In the Oakmark Fund, for example, we own 10 stocks in the financials sector, comprising about 30% of the portfolio. Their median P/E on expected 2021 earnings is 9 times, compared to the S&P 500 at 16 times. Median price-to-book is 1.2 times and dividend yield is 2.3%, compared to the S&P 500 at 3.6 times book and a 1.9% yield. So, on earnings, assets and yield, the banks appear much cheaper than the S&P 500. Normally, stocks that look that cheap are expected to grow much slower than the market or even experience declining earnings. In this case, however, we expect our median financial stock to have annual EPS growth of 8%, which exceeds the consensus expectation for the S&P 500. To us, faster growth, higher yield and cheaper price translate to win, win and win. We believe that the market will eventually reflect our view by narrowing the gap between the S&P 500’s and the financials sector’s P/E ratios. Our portfolio is filled with stocks whose stories sound similar and our research leads us to believe are selling at bargain prices—relative to both other stocks and to the absolute returns we expect in assets other than equities.

One year ago in this commentary, after the market fell 14% in the fourth quarter, I wrote: “The stock market looks more attractive to us than it usually does, and the divergence among individual stocks allowed us to structure a portfolio that we believe is more undervalued relative to the market than it usually is. Though the decline has made watching the market painful, we are all gritting our teeth and adding to our personal holdings.” With hindsight, we were right about the market being unusually attractive, but we have yet to prove that our portfolio was more attractive than the market. It is frustrating when market performance doesn’t reflect our estimates of business value, but that’s what creates opportunity. Since our longest tenured mutual fund, the Oakmark Fund, started in 1991, its annualized return has been 12.5% versus 10.0% for the S&P 500. 

Yet during those 28 years, our trailing three-year return has lagged behind the market 49% of the time. That number falls to 35% for 5-year and just 22% for 10-year time periods. We understand that patience is in short supply when a fund underperforms. In addition to our strong long-term record, consider a few other issues when evaluating our recent returns.

First, most value funds have underperformed over the past three years at least in part because investors have shown little concern for valuation as some high growth stocks have surged. Second, the relative values that are available today in sectors like financials (our largest exposure) seem historically unusual. And, finally, our investment philosophy and team have been remarkably consistent throughout our history. In our view, this consistency is a major factor behind our long-term outperformance. 

We believe our long-term returns have been higher because we have applied our value approach consistently as opposed to following current market trends. Based on what we’ve seen in the past, we believe today’s market offers the opportunity to profit from a potential narrowing of the gap between business value and stock price. That’s exactly what we’ve been exploiting for the past 28 years. 

VIsión del impacto en Oakmark del coronavirus

Coronavirus fears have swept through markets recently as concerns about its potential global impact have rapidly accelerated from “This will be bad for China for a while” to “How many weeks of food should our family have on hand?” In the face of this anxiety, we want to explain how we’re factoring in the possible significance of this virus on the value of your investments.

At Oakmark, we buy stocks at substantial discounts to our estimates of their intrinsic value, taking the perspective of being the sole owner of a private business. We estimate these intrinsic values by forecasting future cash flows and discounting them to today. The S&P 500 trades at a 2020 GAAP P/E ratio of around 23-24x today, which, converting earnings to cash flow, means the typical company will generate 4%-5% of its current market cap in 2020 cash. Mathematically, most of the total value of a growing company comes from the aggregate cash it will generate in the years 2023-2050 and beyond.

If 2020 cash flows for the entire market dropped all the way to zero, the aggregate value of the market should only fall by 4%-5%. Therefore, we believe the proper question to ask when analyzing the coronavirus (or any emerging macro risk) is “How much will this affect the long-term cash flows of businesses?” I doubt very much that the owner of a thriving family business would accept a dramatically reduced offer for her entire company today versus two months ago simply because of virus fears.

While we can’t answer that long-term cash flow question with certainty, we can look back at prior “epidemic” fears to see the impact they had over time. SARS, bird flu, Ebola, and the West Nile virus are all examples of exogenous medical emergencies that the market faced the past two decades. In all cases, world economies adjusted to the threats without seeing significant impacts to long-term cash flows. In all four of those cases, the S&P 500 index exceeded its pre-outbreak high within two months of the initial concerns.

But it’s not just epidemics…it’s always something. In Bill Nygren’s third-quarter market commentary of 2016, when he discussed the Oakmark Fund’s 25th anniversary, he cited a litany of frightening events that occurred over that preceding quarter century (including the aforementioned epidemics, Desert Storm, 9/11, the global financial crisis, Brexit, etc.). Despite all of these risks, the S&P 500 increased nine-fold over that time frame (and the Oakmark Fund 19-fold).
As with those other nerve-wracking crises (each uniquely different from each other), no one knows how this particular issue will develop. There isn’t enough data today to reach specific conclusions. But you should know that at Oakmark, our framework for dealing with exogenous risks like this is to attempt to determine the impact on business value rather than extrapolate near-term costs in perpetuity.


Carta de Bill Nygren

The most common question we are getting asked today by investors is, “How should I change my portfolio given how much the market is down?” If you’ve read any of our older commentaries, you can guess that the answer will probably include the word “rebalance.” 
During times of crisis, we think it is important to remember what our expertise is and limit our opinions to what we know best. Nobody at Oakmark is an infectious disease specialist. Our opinion on the duration and magnitude of the economic decline caused by the coronavirus is no more likely to be accurate than what you can read at many online sources. But our expertise is in valuing businesses and we have the historical perspective of how stock market prices and long-term business values can sometimes radically diverge. 
The S&P 500 has declined by 30% since its peak on February 19. My colleague Win Murray recently wrote a piece looking at discounted cash flow math. He showed that with the market trading at more than 20 times earnings, the current year cash flow represents only about 4% of a typical company’s value. Clearly, this suggests the market decline may be excessive relative to a sober analysis of the potential loss in business value. With our historical perspective, we can tell you that if the economy and P/E multiples return to “normal” within a few years, current valuations look unusually attractive. 
During market corrections over the past decade, we’ve often been asked, “How do the values today compare to those during the Great Recession in 2008?” The answer has always been that while the values looked good relative to history, they were not as extreme as in 2008. Today, I can say that our analysis suggests similar attractiveness. On our approved list of about 120 stocks, all but two are trading beneath our buy target. At Oakmark, we normally sell stocks when they reach our sell targets and redeploy that capital into those selling at their buy targets. Today as in 2008, we see opportunities to sell a stock at its buy target and redeploy the capital into a stock selling at half of our buy target. 
By no means does that mean today is the market bottom. We don’t think we are any better at guessing market tops and bottoms than anyone else. That’s why our advice is always to look at one’s asset allocation—and when extreme market moves take it out of balance, sell what’s gone up and use those funds to buy what’s gone down. In a little under a month, the stock market has fallen by nearly 30%, while long bonds have increased nearly 20%. If your asset allocation in mid-February was consistent with your financial plan, the market has since moved it out of balance. To restore your asset allocation today would require selling about 30% of your long bond portfolio and reinvesting the proceeds in stocks. 
As an example, say that on February 20, a $100,000 portfolio was invested $60,000 in the S&P 500 and $40,000 in long-term U.S. Treasuries. Today, the portion in the S&P 500 would have fallen to about $42,000, while the bonds increased to $48,000. But, the bonds have inadvertently become the majority of what now is a $90,000 portfolio. To restore a 60/40 balance, the investor needs to sell $12,000 of bonds and invest that money in equities1. We and others don’t know when the market will bottom, but rebalancing after large moves restores exposure to an asset that has underperformed and positions the portfolio for an eventual recovery. And remember, rebalancing isn’t necessarily completed after one adjustment. If the stock market either recovers quickly or continues to decline, another rebalance would be needed to get back to asset allocation targets. 
Most of the Oakmark portfolio managers have added to their personal holdings of our Funds to restore their own portfolio balance. An interviewer last week said to me, “As value investors, you must feel like kids in a candy store.” While that is true for those of us who work at Oakmark, most investors have the opposite reaction. It’s easier emotionally to sell after a market decline than it is to buy. That’s a big reason why so many investors have historically underperformed the market. They buy after stocks go up and sell after stocks go down. Instead of making that an emotional decision, taking steps to rebalance removes the emotion and has you buying after declines and selling after increases. As with things outside of finance, if decision-making can be mechanized, the implementation becomes much easier. We are confident that there are many attractive opportunities today for investing additional long-term capital in the stock market. 

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