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 is Oakmark's take on the 2020 first-quarter market crash. The manager argues that panic drove stock prices down 30-50% for many solid companies, but their intrinsic value (what the business is really worth based on future cash) only dipped a little. His portfolio now trades at 40 cents on the dollar of that value, near historic lows. For example, BNP Paribas and Credit Suisse trade at about 40% of tangible book value (net assets), even though their balance sheets are stronger than in 2008. BMW's enterprise value (market cap plus debt) is under €20 billion, while its normal annual sales are near €100 billion. For regular investors, this suggests staying calm during panic and looking for bargains in strong companies.
Oakmark’s report notes that due to the impact of the COVID-19 pandemic, the Oakmark International Fund and International Small Cap Fund performed very weakly in the first quarter of 2020, with many portfolio holdings experiencing stock price declines of 30–50%. The core argument is that short-term m
This chapter discusses the extremely weak performance of the Oakmark International Fund and International Small Cap Fund in the first quarter of 2020 amid the COVID-19 pandemic shock. However, the author argues that the sharp stock price declines driven by market panic have created a massive divergence from fundamental intrinsic value, presenting a historic opportunity for long-term value investors.
The author’s core investment thesis is that short-term market panic has driven stock prices down by 30-50%, while intrinsic value, based on discounted cash flows, has only declined by mid-single-digit to low-double-digit percentages. The current portfolio trades at approximately 40 cents on the dollar of intrinsic value, a historic discount level. Contrary to market consensus, the author views this as a prime opportunity for value investing, not a crisis.
| Company | Current Valuation Metric | Historical Comparison | Fundamental Condition |
|---|---|---|---|
| BNP Paribas | ~40% of tangible book value | Below 2008 financial crisis level | Significantly stronger balance sheet |
| Credit Suisse Group | ~40% of tangible book value | Below 2008 financial crisis level | Significantly stronger balance sheet |
| BMW | Enterprise value < €20 billion | No direct comparison | Normalized sales ~€100 billion, 2022 operating profit > €7 billion, excess cash |