Dear Fellow Shareholders,
The year 2000 proved to be a turning point for value investors, as a
focus on stock valuations drove investors to more traditional companies at the expense of
technology and Internet stocks. As such, our portfolios performed well since we remained
committed to buying high-quality companies trading at significant discounts to their
underlying value.
In our last letter we provided a performance summary of our funds versus the major indices since the NASDAQ's market peak of March 10. Below, you'll see an update of this information through the end of the year:
| Fund |
% return from market |
| The Oakmark Fund | 40.89% |
| The Oakmark Select Fund | 29.54% |
| The Oakmark Small Cap Fund | 11.01%5 |
| The Oakmark Equity and Income Fund |
20.14%6 |
| S&P500(w/inc)1 | -4.50% |
| NASDAQ Composite2 | -50.99% |
| The Oakmark Global Fund | 25.13%7 |
| The Oakmark International Fund | 17.29% |
| The Oakmark International Small Cap Fund |
-2.29% |
| MSCI World Index3 | -8.13% |
| MSCI EAFE Index4 | -13.44% |
This performance obviously does not span the full year. However, it does illustrate a significant shift in favor toward our value style — and points out that our focus on reward and risk is critical for our investors. We remain extremely confident in the continued attractiveness of our portfolios, with the price-earnings (P/E)8 gap between our portfolios and market averages suggesting we are very well positioned.
Many clients have asked about our interest in the technology sector, especially since scores of these companies have seen sizeable corrections. We are slowly starting to look at technology stocks, and are buying a few, but believe that many companies remain overpriced relative to their underlying business value. Therefore, we continue to find the best values in more traditional companies. We will be willing to make more significant investments in technology companies when values become compelling.
We'd like to thank you for the positive comments we've received about our website. Investors continue to visit www.oakmark.com to read manager commentary and recent news, view performance and top holdings, and to access account information. During the year we were pleased to add transaction capabilities, and we invite you to access your account so that you may perform transactions online.
Value investors should be encouraged by what happened in 2000. Investment styles move in cycles — and tend not to be short. We saw growth outperform value for several years, and we view this period as the beginning of a shift toward value, not the end.
We appreciate your continued investment and wish you the best in 2001.
Victor A. Morgenstern
Chairman
Robert M. Levy
President
January 4, 2001
Closing Note: After 31 years at Harris Associates, Victor Morgenstern is retiring. All of us would like to thank him for the significant contribution he has made to the firm. Victor's valuable experience and stewardship will continue to provide oversight to the Oakmark Family of Funds in his continuing role as Trustee and Chairman of the Board. We look forward to our ongoing relationship.