Dear Fellow Shareholders,
We are pleased that our disciplined investment style continues to
reward our shareholders. Investors who remained committed to value outperformed once again
in the first quarter, as the market continued to favor reasonably priced companies. The
correction that many companies experienced last year—and this year—accentuates
our belief that stock price will ultimately reflect underlying business value.
The past quarter has been a robust period for value investors, and we believe this strength is sustainable for the foreseeable future. Valuations continue to be attractive, and the quality of our holdings—and our confidence in them—remains strong.
We have often talked about the depth of our firm's investment talent. The following two paragraphs, which address overall market conditions, include excerpts from a letter written by portfolio manager Ed Loeb, one of our partners:
As of late, it's been hard to avoid hearing that dreaded word: recession. Whether we are in a recession or not, the combination of high stock prices, speculation and overly optimistic forecasts created a froth that inevitably had to correct itself (as difficult as that may be for investors). The U.S. economy is by no means perfect, but an extended downturn is unlikely given the economy's breadth, the self-correcting nature of the stock market and an attentive Federal Reserve Board.
From our perspective, the events of the past year were not surprising. An uncertain atmosphere is the hallmark of any rapid stock market decline. This is precisely when bottom-up, fundamental analysis and a focus on risk can protect portfolios and provide attractive long-term investment returns. We remain committed to our core value philosophy, open-minded to new ideas and opportunistic in this uncertain environment.
Technology companies are becoming of interest to value investors, and we are selectively looking at tech stocks — at the right price and right valuation. A year ago we were investing in companies that employed technology to make their business model better. Now, we are investigating companies that are direct plays on technology. However, while these stocks have fallen significantly from recent highs, we still believe that, as a whole, technology is relatively overvalued.
We are pleased to announce that toward the end of summer 2001, current shareholders and new investors will be able to open new accounts online. Through a secure area of oakmark.com, investors can complete an online agreement and account application, and have money electronically transferred from their personal bank account to open a new Oakmark account. We remain dedicated to website enhancements that make investing easier and help keep you informed.
We are excited about the opportunities being presented to us as value investors, and we want to thank you for your continued trust.
Robert M. Levy
President
April 4, 2001