Any OAKBX holders out there?

Shostakovich

I've held OAKBX for about 4-5 years. I noticed in the most recent portfolio holdings, the fund is about 12% cash. I don't recall OAKBX ever having much more than a trivial cash stake (usually the "cash" portion of the portfolio is in treasuries).

I know management was actually discouraging investors for contributing new money to the fund, because they thought there was so little value in bonds. But the cash stake strikes me as new. Wonder if they're expecting a collapse of bonds? (...they've also been picking up a few foreign sovereigns here and there...).

Anyone else notice this turn in OAKBX's positioning?

[Deleted User]

Been a holder of this fund for many years. IMHO this fund is very large and Clyde has to find a home for its climbing asset intakes. That can be a problem at times if he can't find good value stocks and he has explained his thoughts on bonds going forward (doesn't expect much return). So because of those facts I'm guessing his cash position has grown to more than normal. Plus this allows him to pounce on good stock buys when they occur without being forced to sell something else.

This fund has not outpaced the indexes in the last couple of years. I've thought of replacing it several times in my taxable account with the Vanguard Taxable Balanced Fund but have never been able to pull the plug. By reading OAKBXs fund reports you get a real sense of what Clyde is thinking and doing with the portfolio and the general market conditions. I think that is what has kept me here. Good luck to you.

Investor

Reply to @Anonymous: The fund invests in mostly large cap stocks. So, there is really not a problem finding room for new monies. In fact, US and Intl. stocks makes up 66% of the portfolio so it is pretty standard equity allocation for this type of fund. So, they did not reduce their equity allocation much if at all.

In their investor letters they had mentioned that they prefer shorter duration bonds. As they shorten the duration, M* starts counting some of these bonds as cash equivalent.

I would not worry about 14% cash stake.

hank

Traditionally the fund has used longer dated high-quality bonds for income and to hedge stock volatility. In recent years, however, managers have sounded increasingly pessimistic regarding the values of these investments, citing historically low interest rates. Likely, the cash you refer to includes funds that in the past would have been invested in longer duration bonds. From Oakmark Equity & Income's 2012 First Quarter Report (December 31, 2011): "To repeat ourselves once again, we believe that high-quality bonds are priced as though inflation will never again be a problem and offer little in the way of risk-adjusted value to investors." - Clyde S. McGregor, Portfolio Manager. As of the reporting date, the fund was invested 22.2% in fixed income, almost entirely government issues. About half of this consisted of short-term debt instruments - so your cash figure sounds about right. I have owned this fund for many years and continue to have a high degree of confidence in management.

http://www.oakmark.com/reports/2012_q1/11-1231_Oakmark 1st Qtr Report final.pdf

VintageFreak

I have also held it in my IRA for 5 years. I consider it to be buy and hold part of my IRA.

BobC

We have used OAKBX for years as a conservative way to get stock exposure in lower-risk portfolios. It does not disappoint. M* stuffs it in a made-up asset class that includes hundreds of funds, many of which have no similarities. I would ignore comparisons to it asset class, and instead compare it to the S&P 500. When the markets are going gangbusters, OAKBX will underperform. That's ok by me, since we use it as a buffer against downside risk. And it excels there just fine.