SECOND QUARTER, 2024
• The Fund returned -3.98% versus 4.28% for the S&P 500 Index for the quarter, and 12.72% since inception, versus 10.57% for the S&P 500 Index over the same period.
• At the sector level, the largest contributors were communication services and information technology, and the largest detractors were health care and energy.
• We are finding attractive investment opportunities across a diverse group of industries amid the unusually wide spread between high P/E and low P/E stocks that exists today. Read more in the 2Q 2024 U.S. equity market commentary.
TOP CONTRIBUTOR | DETRACTOR
Top contributor
Alphabet (GOOG, Financial) was the top contributor during the quar-ter. The stock price rose after the U.S.-based com-munication services company reported first-quarter operating income growth of 31% versus the prior year. We believe that management's cost reduc-tion initiatives will improve operating efficiency and lead to faster earnings growth. In addition, we ex-pect that the company's new AI-powered features, showcased at the recent Google I/O conference, will increase the value of its products to users. At its current share price, we continue to see upside to our estimate of Alphabet's intrinsic value.
Top detractor
IQVIA Holdings (IQV, Financial) was the top detractor during the quarter. Although the U.S.-based health care company's stock price fell following the release of first quarter results, the company's fundamentals were in-line with consensus expectations. Forward-looking indicators in the clinical trial business continue to be favorable, and management foresees gradual improvement in the technology and analytics solutions segment in the second half of this year and a stronger rebound next year. We believe IQVIA should sustain above-average long-term growth even though it trades at a discount to other life sci-ences and data and information services companies.
PORTFOLIO ACTIVITY
New purchases
Corebridge Financial (CRBG, Financial) is one of the largest providers of retirement solutions and insurance products in the United States. Corebridge's extensive distribution network and long-standing relationships with large financial institutions have helped it maintain a high market share position for decades. In our view, the market values Corebridge as a variable annuity company despite its more diversified and less risky earnings profile relative to peers. In addition, we believe the recent reduction in AIG's significant ownership stake removes an overhang on the stock price. The combination of these factors provided the opportunity to invest in Corebridge at a discount to other non-variable annuity peers and our estimate of intrinsic value.
Nasdaq (NDAQ, Financial) is a global technology company that provides platforms and services for capital markets and other industries. Over the past decade, under the leadership of CEO Adena Friedman, Nasdaq has transformed from a traditional equity exchange into a collection of fast-growing, high-quality software and data businesses with the majority of revenue coming from non-exchange segments. Nasdaq's recent acquisition of Adenza led some investors to question management's capital allocation discipline. However, we believe the subsequent share price reaction more than compensates for the risk that Nasdaq overpaid for Adenza. More importantly, the experience seems to have catalyzed a renewed focus on organic growth, debt pay-down and capital return. Despite Nasdaq's potential for faster-than-average growth, high mix of recurring revenue, and impressive operating margins, the stock trades at a P/E multiple in line with the broader market. We were pleased to purchase shares in this excellent business for an average price.
PORTFOLIO MANAGERS
(Year joined Harris | Oakmark)
William C. Nygren, CFA (1983)
Michael A. Nicolas, CFA (2013)
Robert F. Bierig (2012)
Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. Total return includes change in share prices and, in each case, includes reinvestment of dividends and capital gain distributions. The investment return and principal value vary so that an investor's shares, when redeemed, may be worth more or less than the original cost.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers and Harris Associates L.P. as of the date written and are subject to change and may change based on market and other conditions without notice.
This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.
Certain comments herein are based on current expectations and are considered “forward-looking statements.” These for-ward looking statements reflect assumptions and analyses made by the portfolio managers and Harris Associates L.P. based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Actual future results are subject to a number of investment and other risks and may prove to be different from expectations. Readers are cautioned not to place undue reliance on the forward-looking statements.
