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 argues that value investing isn't just about buying cheap stocks; it's about buying great businesses at a discount to what they're worth, even if they have high growth. Right now, the gap between cheap stocks (price-to-earnings ratio around 8) and expensive ones (P/E around 60) is near an all-time high, and the cheap stocks aren't lower quality—so they may be a better bet. The author gives examples like buying Uber and Adobe in 2022, then selling them for even cheaper CVS Health in 2023. For everyday investors, don't get stuck on labels; focus on what a company is truly worth.
The Oakmark report explores the definitional divergence between value and growth investing and the current market opportunities. The core argument cites Buffett: growth is part of the value equation. Data shows that over the decade ending in 2021, the Russell 1000 Growth Index outperformed the Russe
This chapter discusses the traditional definitional divergence between value investing and growth investing, as well as opportunities for price-sensitive investors in the current market environment. The report notes that in 2022, value indices outperformed growth indices by 22 percentage points, but in 2023, growth indices reversed the trend by 24 percentage points, completely erasing the gains of value stocks. This rare and significant volatility has made "growth vs. value" a hot topic, yet the market still lacks consensus on the definitions of these two terms.
The author argues that pitting value against growth is a misclassification—growth is part of the value equation. Oakmark adheres to value investing but defines it more broadly: value investing is not simply buying stocks with low price-to-book or low price-to-earnings ratios, but rather purchasing high-quality companies at prices below their intrinsic value, including growth companies with P/E ratios higher than the S&P 500 (e.g., Alphabet). Counterintuitive insight: Currently, the valuation gap between low-P/E stocks (the 50th lowest P/E in the S&P 500 is only 8 times) and high-P/E stocks (the 50th highest is 60 times) has reached 7 times, far exceeding the historical average of 4 times. However, the business quality of low-P/E stocks has not deteriorated, making them a better hunting ground than in normal times.