During his recent interview with TIP, Bill Nygren discussed how he’s finding lots of opportunities with the market down so much. Here’s an excerpt from the interview:
Nygren: That bottom would be somewhere around October, and that’s basically what we went through. Now, of course, that’s no guarantee that we’re done with the market going down, but I thought it would be comforting to individuals who are thinking, maybe I should sell, because we’re in a bear market to know we’ve already experienced what a normal bear market has.
And we’ve already experienced the decline of a normal recession and already experienced the decline of high inflation. So at Oakmark, as you know, what we try to do is estimate the long-term business value, and then we look for large deviations between the stock price and that estimate of business value.
And with the market down so much, it’s no surprise we’re seeing more names that we’re meeting our criteria being significantly undervalued. I think one way to look at. Is to look at the portfolio turnover we’ve seen. Typically, the Oakmark fund owns just over 50 names and in a 12 month period you might see us have 10 new ideas.
In just nine months, I believe we had 12 new ideas, and in the Oakmark Select Fund, much smaller portfolio, only about 20 names. Typically, we see about four new names in a year and in just nine months, we’d already seen eight new names. We see the volatility and the more you spread out the performance, the greater the opportunity for us to sell the names that have held up well and then recycle those dollars and the names that have become attractive.
You can listen to the entire discussion here:
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