Bill Nygren (Trades, Portfolio) disclosed the Oakmark Fund’s second-quarter equity portfolio earlier this week.
To achieve long-term capital appreciation, the renowned guru, who also manages the Chicago-based firm’s Select and Global Select funds, usually invests in mid- and large-cap companies. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he prefers to take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then waits for the gap between the two to close before selling.
In his quarterly commentary, Nygren commented on risk, which “could be the word that investment professionals most disagree about. We agree that an investment with higher risk requires higher return, but we don’t agree on how to measure risk.”
While some argue that risk lies in lack of diversification, the guru said, “A risk measure we consider more important is how much a fund loses when the market declines.”
Keeping these considerations in mind, the NPORT-P filing shows Nygren established five new positions during the three months ended June 30, sold out of five stocks and added to or trimmed a number of other existing investments. Notable trades included a new holding in First Citizens BancShares (FCNCA, Financial), an increased bet on American International Group Inc. (AIG, Financial), a reduction of the Oracle Corp. (ORCL, Financial) stake and the divestment of Adobe Inc. (ADBE, Financial) and Netflix Inc. (NFLX, Financial).
Investors should be aware that, just like with 13F reports, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, they collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these limited filings can provide valuable information.
First Citizens BancShares
The guru invested in 185,000 shares of First Citizens BancShares (FCNCA, Financial), allocating 1.51% of the equity portfolio to the holding. The stock traded for an average price of $1,153.86 per share during the quarter.
The Raleigh, North Carolina-based bank holding company has a $19.53 billion market cap; its shares were trading around $1,355.96 on Friday with a price-earnings ratio of 1.84, a price-book ratio of 1.04 and a price-sales ratio of 3.25.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 74 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received high growth and value ratings, its profitability rank is more moderate and the financial strength and momentum grades are low.
Of the gurus invested in First Citizens, Philippe Laffont (Trades, Portfolio) has the largest holding with 2.21% of its outstanding shares. Hotchkis & Wiley, Chuck Royce (Trades, Portfolio), David Einhorn (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), George Soros (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also own the stock.
American International Group
The investor increased his stake in American International Group (AIG, Financial) by 134.99%, picking up 3.50 million shares. The transaction impacted the equity portfolio by 1.28%. Shares traded for an average price of $53.64 each during the quarter.
Nygren now holds 6.09 million shares total, which occupy 2.23% of the equity portfolio. GuruFocus estimates he has gained 16.14% on the long-held investment.
Also known as AIG, the insurance company headquartered in New York has a market cap of $41.37 billion; its shares traded around $58.12 on Friday with a price-earnings ratio of 9.56, a price-book ratio of 0.99 and a price-sales ratio of 0.88.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 71 implies the company is likely to have average future performance, driven by a high momentum rank and more moderate ratings for the other four criteria.
With a 2.26% stake, Diamond Hill Capital (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors include Hotchkis & Wiley, Barrow, Hanley, Mewhinney & Strauss, Richard Pzena (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and Steven Romick (Trades, Portfolio).
Oracle
Nygren curbed his Oracle (ORCL, Financial) stake by 41.44%, selling 1.95 million shares. The transaction had an impact of -1.22% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $103.23.
He now holds 2.75 million shares in total, which make up 2.09% of the equity portfolio. GuruFocus found he has gained an estimated 50.29% on the investment so far.
The Austin, Texas-based software company has a $312.87 billion market cap; its shares were trading around $115.27 on Friday with a price-earnings ratio of 37.67, a price-book ratio of 288.18 and a price-sales ratio of 6.39.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
The GF Score of 77 means the company will likely have average performance going forward on the back of high growth and profitability ranks, middling marks for momentum and financial strength and a low value rating.
First Eagle Investment (Trades, Portfolio) is Oracle’s largest guru shareholder with a 0.69% stake. The stock is also being held by Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Jeremy Grantham (Trades, Portfolio), Laffont and several others.
Adobe
Impacting the equity portfolio by -1.73%, the guru exited his 663,000-share position in Adobe (ADBE, Financial). The stock traded for an average price of $402.56 per share during the quarter.
GuruFocus data shows Nygren gained an estimated 23.52% on the short-lived investment.
The software company headquartered in San Jose, California, which is known for inventing the PDF and its digital media editing products, has a market cap of $238.93 billion; its shares traded around $524.21 on Friday with a price-earnings ratio of 50.02, a price-book ratio of 16.20 and a price-sales ratio of 13.18.
The GF Value Line suggests the stock is currently modestly undervalued.
Supported by solid ratings across the board, the company has a GF Score of 100. This means it has high outperformance potential.
Holding a 1.34% stake, PRIMECAP is the company’s largest guru shareholder. Adobe is also being held by Fisher, Chuck Akre (Trades, Portfolio), Laffont, the Harbor Capital Appreciation Fund (Trades, Portfolio), Baillie Gifford (Trades, Portfolio) and several other gurus.
Netflix
With an impact of -1.56% on the equity portfolio, Nygren sold his 668,900-share holding of Netflix (NFLX, Financial). During the quarter, shares traded for an average price of $367.96 each.
GuruFocus says he gained 46.62% on the investment over its lifetime.
The Los Gatos, California-based streaming entertainment company has a $185.37 billion market cap; its shares were trading around $418.30 of Friday with a price-earnings ratio of 44.55, a price-book ratio of 8.14 and a price-sales ratio of 5.89.
According to the GF Value Line, the stock is fairly valued currently.
The company has high outperformance potential with a GF Score of 94. It raked in high ratings for three of the criteria, but the value and momentum ranks are more moderate.
Baillie Gifford (Trades, Portfolio) is Netflix’s largest guru shareholder with a 1.28% stake. Fisher, Frank Sands (Trades, Portfolio), Laffont and Tom Russo (Trades, Portfolio) also own the stock.
Additional trades and portfolio performance
During the quarter, Nygren also entered a position in Celanese Corp. (CE, Financial), sold out of Take-Two Interactive Software Inc. (TTWO, Financial), pulled back on the Meta Platforms Inc. (META, Financial) stake and boosted the holdings of ConocoPhillips (COP, Financial) and Charles Schwab Corp. (SCHW, Financial).
The Oakmark Fund’s $15.72 billion equity portfolio, which is composed of 57 stocks, is most heavily invested in the financial services sector.
The fund returned -13.40% in 2022, outperforming the S&P 500’s -18.11% return.
