Here is a link to the latest fund manager's letter for OAKBX.
http://www.oakmark.com/opencommentary.asp?commentary_id=664&news_from=c&fund_id=0Since 2008, when OAKBX did preserve us shareholders from the worst of the crash, performance has been mediocre. Even at 74% equity exposure, the fund still can't approach its bogey and in 2012 fell 3 percentage points below the Lipper balanced fund standard of +12%. Management admits to over-exposure to the energy sector. Cynical shareholders, including me, would accuse the manager of falling into a value trap.
Comments
Personally, I've added exposure to Canadian oil names and think adding - to a reasonable degree, given one's risk tolerance - to energy and real assets in general that have underperformed in the last couple of years is certainly not a bad idea, especially for those with a mid-term time horizon. As for the Canadian names, given how they've done, I think there's the chance of seeing more deals similar to the CNOOC/Nexen deal that happened last year.
Not going to recommend whether or not to hold the fund, but I do think there are some values in energy.
Regards,
Ted
http://news.morningstar.com/fund-category-returns/moderate-allocation/$FOCA$MA.aspx Click-On 5-Yr.% at top
Thus it is very easy to be critical with respect to the Oakmark managers. Their advantages often become apparent on scale greater than 10 years. What is especially interesting is that their international fund colleagues are equally successful. Thus it seems that they have good investment culture there. Of course there is no guarantee that this long term outperformance will continue, especially at the time when large cap stocks are supposed to dominate, and the OAKBX became so large, so in the end it is up to you to make your decision. But I would not dismiss these managers simply because during the last 5 years some other managers were doing better.
FPACX 34% cash, 3.6% in bonds, 43% US stocks, 13% international
OAKBX 15% in cash, 13% in short term Treasuries (i.e. almost cash), 57% US stocks, 12.5% international
Of course it is up to you to decide which fund is better, but I noticed that many managers whom we like for their long term performance have lots of money in cash now, look e.g. at ARIVX. The real argument to sell would not be the cash position per se, which can be used opportunistically by talented managers, but some other problems (loss of touch, aging manager, too large portfolio). I guess you need to check how significant these factors are.
I must be clear: I am not advocating the benefits of having OAKBX; I do not have much money there, though I am considering it, as well as FPACX. Nobody knows how these funds will behave in future; chances are they will do at least OK. What I am trying to say is that Oakmark people do not like bonds and cash now, they believe that stocks are undervalued. This view is challenged by others. It seems that OAKBX uses short term bonds in a way similar to cash. Others use a more aggressive bond allocation. Few years later we will know who made a better call.
Hang on to OAKBX. Let it be your lower-risk "balanced" option. Use something else for that big alpha play.
Hang on to OAKBX. Let it be your lower-risk "balanced" option. Use something else for that big alpha play.