Oakmark is the mutual fund family launched in 1991 by Harris Associates, the Chicago deep-value firm founded in 1976 (about $105bn AUM). Bill Nygren runs the flagship Oakmark Fund and David Herro the Oakmark International Fund, buying businesses at large discounts to intrinsic value and holding them like owners — publishing quarterly fund commentaries, market commentaries and insight articles.
This report explains how Oakmark's international funds still made money in 2019 despite wild market swings from trade wars and Brexit. For regular investors, the key takeaway is that European bank stocks, while up, are still cheap compared to early 2018 and pay high dividends. Auto and industrial companies are cutting costs, so if demand picks up, profits could improve. Also, the US dollar is now expensive and may weaken, which would help returns on overseas investments. Worth reading because it shows why buying undervalued stocks (value investing) can work even in uncertain times.
Oakmark's 2019 research report notes that despite significant market volatility driven by headline news such as trade wars, Brexit, and political turmoil in the EU, both the Oakmark International and International Small Cap funds delivered strong absolute returns and outperformed their benchmarks, w
This chapter discusses the sharp volatility in global equity markets in 2019, driven by headline risks such as the trade war, Brexit, and political turmoil in the European Union, as well as how the Oakmark International and International Small Cap funds achieved strong absolute returns and outperformed their benchmarks in this environment. The report notes that although market sentiment improved at year-end due to the UK general election and the US-China trade agreement, value investment opportunities remain.
The report's core investment argument is that despite the market rebound in 2019, the portfolio still offers good value, based on three reasons: European financials, while rebounding, remain well below early-2018 levels; consumer discretionary and industrial sectors (especially auto-related) are recovering from troughs but lag financials, with end markets bottoming, R&D spending peaking, and cost-cutting plans set to improve earnings; European and UK currencies are undervalued based on purchasing power parity, and the US dollar has shifted from undervalued five years ago to overvalued, potentially providing a tailwind for international investments. The counterintuitive judgment is that market fears of a Corbyn socialist government have been "crushed," and Brexit uncertainty has eased, yet the author still favors value stocks over chasing headline-driven volatility.
For investors, this means focusing on the high dividend yields and capital return potential of the European financial sector, as well as earnings improvement opportunities in auto and industrial sectors driven by cost cuts and demand recovery. Additionally, the overvalued US dollar may provide a currency tailwind for international investments, suggesting an overweight in European and UK assets, particularly value stocks that remain well below early-2018 levels.