Kristi Rowsell - December 31, 2018
Dear Fellow Shareholders,
During much of 2018 and especially its chaotic finale, markets endured one of the most challenging environments we have experienced in our many years of managing the Oakmark Funds. In 2018, trends, such as declining oil prices, rising interest rates, potential trade wars and other geopolitical worries, disproportionately affected the stock prices of many of our portfolio holdings. The adjustment has been particularly unpleasant given the low volatility of recent years. Yet we remain committed to our disciplined, long-term value investing philosophy and believe it should provide better results in 2019.
During times like these, we are grateful to have decades of experience with which to evaluate the factors contributing to today’s conditions. Our knowledge helps us identify dislocations between stock prices and underlying business value so that we can take actions that are consistent with our investment philosophy: We invest in quality companies that we believe are undervalued and have significant long-term potential. We analyze our holdings and prospective holdings with rigor and intensity. We are not content to simply “buy the dip.” Instead, we engage in a fulsome review in which we evaluate the long-term fundamentals of these global businesses to determine whether their future cash flow generation has been fundamentally weakened. For a company to pass our tests, we must believe that its stock price will reflect its intrinsic business value over time.
As you read about our 2018 portfolio performance in our shareholder letters, know that we, too, invest significant amounts of our personal net worth in the Oakmark Funds. Each year, we disclose the aggregate holdings of our personal shares in the Oakmark Funds. We believe this demonstrates our commitment to stewardship of your investment with us and our mutual alignment of interests. The employees of Harris Associates, including your portfolio managers, and the Independent Trustees of the Oakmark Funds made substantial new purchases throughout the year such that, even after the year’s negative returns, we can report we have more than $460 million collectively invested in the Oakmark Funds, as of December 31, 2018. We hope this confirms our conviction in our portfolios and the opportunities we see in the market.
Thank you for your continued confidence in the Oakmark Funds.
President of Oakmark Funds
President of Harris Associates
The discussion of the Funds’ investments and investment strategy (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) represents the Funds’ investments and the views of the portfolio managers and Harris Associates L.P., the Funds' investment adviser, at the time of this letter, and are subject to change without notice.
All information provided is as of 12/31/2018 unless otherwise specified.