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 why Oakmark remains bullish on stocks despite the recent bond market drop. They argue that bond prices fell mainly due to short-term speculators, not long-term investors. Oakmark already assumes a 3% floor for 7-year Treasury yields, so even if rates rise to that level, stocks still look cheap. For ordinary investors, this means don't panic-sell stocks when rates go up—consider rebalancing by selling bonds and buying stocks instead. Terms like 13F (a required institutional holdings report), moat (competitive advantage), capital cycle (how money flows between industries), and shorting (betting on a price decline) are explained in context.
Oakmark's research report discusses the reasons behind the recent market correction and its impact on stock valuations. The report notes that since the end of March, the S&P 500 had risen 7% (including dividends) to a historic high, but subsequently experienced a 6% correction due to a decline in th
This chapter discusses whether the recent decline in the bond market has altered Oakmark’s optimistic view of the stock market. The report notes that since the end of March, the S&P 500 had risen 7% (including dividends) to a record high, but subsequently experienced a 6% pullback due to bond market volatility. The market generally attributes the decline to the possibility that the Federal Reserve may reduce bond purchases, leading short-term speculators ("tenants") to sell bonds.
Oakmark explicitly states that the bond market decline has not weakened its positive stance on stocks, which remain undervalued. The author believes that current bond prices are primarily driven by short-term traders rather than long-term investors. Therefore, Oakmark has already assumed a 3% "floor" for the seven-year Treasury yield in advance. Even if interest rates rise further to this level, it will not change its stock valuation judgment. This view runs counter to market consensus—most investors panic over rising interest rates, but Oakmark believes stocks remain attractive relative to bonds.
1. Bond Market Loss Comparison: Apple’s 30-year bond fell from a May high of 104 to 85, a decline of 18%, exceeding five years of coupon income; in contrast, the S&P 500 only corrected by 6%, which is relatively moderate.
2. Dividend Discount Model (DDM): Oakmark uses the seven-year U.S. Treasury as the risk-free asset. Historical analysis shows that stock investors typically require an average risk premium of about 5% (450 basis points) for stocks. For example:
3. Interest Rate and Valuation Relationship: Currently, the seven-year Treasury yield is only slightly above 2%, still below Oakmark’s 3% floor. If interest rates rise above 3%, the reason must be distinguished:
4. Inflation Expectations: The TIPS market indicates current inflation expectations of approximately 2% per year, which Oakmark inputs as a growth assumption.
This section focuses on Apple Inc.’s specific holdings within the Oakmark fund portfolio and clarifies the definition of the index benchmark. The report uses holding data to illustrate Oakmark Fund’s allocation strategy for Apple, while emphasizing that changes in holdings do not constitute a recommendation for individual stocks.
The author’s core judgment is: There is a significant divergence in Oakmark Fund’s holdings of Apple—the Oakmark Fund holds a small position in Apple (1.7%), while the Oakmark Select Fund holds none at all. This reflects a differentiation in stock selection strategies across different funds, rather than an overall bearish or bullish stance on Apple. Additionally, the report reaffirms the objectivity of the S&P 500 Index as a benchmark, emphasizing its market-cap-weighted nature.
| Fund Name | Apple Holding Weight | Data Cutoff Date |
|---|---|---|
| Oakmark Fund | 1.7% | 2013/6/30 |
| Oakmark Select Fund | 0% | 2013/6/30 |
For investors, it is essential to note the point-in-time nature of fund holdings and differences in strategy: Different funds under the same asset management company may have entirely different allocations to the same asset (e.g., Apple’s divergence between the Oakmark Fund and the Oakmark Select Fund). This suggests that investors should focus on the specific investment objectives and stock selection logic of each fund, rather than relying solely on aggregate holding data. At the same time, the composition rules of the index benchmark (market-cap weighting, dividend reinvestment) are key prerequisites for evaluating a fund’s relative performance.