Bill Nygren Market Commentary | 3Q11 — Summary & Takeaways · Oakmark Funds

Theme and Background

This chapter discusses the effectiveness of long-term value investing strategies in the current market environment. The report points out that although the yields of high-quality stocks are currently much higher than bond yields, investors continue to reduce their holdings of large-cap stocks due to fear of short-term volatility, with market sentiment being extremely pessimistic.

Core Thesis

The author's core investment argument is: This is a "once-in-a-generation" buying opportunity, and investors should adhere to a "buy and hold" strategy, capitalizing on times when stock prices fall below intrinsic value. Counterintuitive judgments include: short-term volatility does not predict negative returns; the current market environment is similar to the 1950s, yet investors are missing opportunities due to fear.

Key Arguments and Data

Historical Volatility Comparison: Since the inception of the Oakmark Fund in 1991, the average daily volatility of the S&P 500 Index has been 1.3%. From July 29 to September 16, 2023 (34 trading days), daily volatility exceeded 1.3% every day, but historically, there have been seven similar abnormal volatility periods lasting over a month, with the longest lasting 87 consecutive trading days.
Long-Term Return Verification: Despite experiencing these volatile periods, the 20-year returns of the Oakmark Fund and the S&P 500 Index have remained "quite substantial," indicating that short-term volatility does not predict negative returns.
Market Sentiment and Behavior: Investors, fearing short-term volatility (e.g., "the market rises 2% one day and falls 2% the next"), have reduced their holdings of large-cap stocks. Media headlines include "Buy and Hold Is Dead" and "Bury Buy and Hold."
Fund Survival Rate: In 1991, there were over 2,000 domestic stock funds; today, only 634 remain in operation (a survival rate of approximately 32%), and only 6% of existing funds have a 20-year track record.

Indicator	Data
S&P 500 Average Daily Volatility (20 years)	1.3%
Abnormal Volatility Days (July 29 - September 16, 2023)	34 days (each day above the average)
Number of Abnormal Volatility Periods Lasting Over a Month in History	7
Longest Abnormal Volatility Period	87 consecutive trading days
Fund Survival Rate Since 1991	Approximately 32% (634/2000)
Proportion of Existing Funds with a 20-Year History	6%

Companies/Assets Involved

Oakmark Fund: A fund managed by the author, established in 1991, employing a long-term value investing strategy. 20-year returns (as of September 30, 2011): 10-year annualized 4.13%, 5-year annualized 0.93%, 1-year -0.67%, expense ratio 1.11%. The author emphasizes that the fund manager's personal capital is primarily invested in this fund.
S&P 500 Index: Used as a market benchmark for comparing volatility and long-term returns.

Investment Implications

Adhere to Long-Term Holding: Short-term volatility (e.g., 34 days of abnormal fluctuations) does not alter the trend of long-term returns. Investors should ignore the noise of "buy and hold is dead."
Seize the Current Opportunity: Yields on high-quality stocks are much higher than bond yields. The present is a time to buy, not to exit the market.
Focus on Fund Survival Rates: Funds with long track records (such as Oakmark) offer more reliable historical data. Short-term performance is heavily influenced by luck, so priority should be given to funds with over 20 years of history.