Oakmark (OAKMX) has long exemplified a patient, bottom-up approach to value investing. Manager Bill Nygren has been at the helm since March 2000 and now comanages the fund with Kevin Grant, who joined parent company Harris Associates in 1988, and Michael Nicolas, who was an analyst at the firm before becoming a comanager in January 2020. The team works closely with a 14-person research team that creates an approved list of ideas for managers to draw from.
Nygren and his colleagues look for stocks that are trading at discounts to their estimated private-market values, which they calculate using a variety of metrics, including discounted cash flow analysis and many other factors. They also look for companies with substantial free cash flows, predictable earnings, and management that demonstrates an ownership mindset. To get these attributes at a discount to intrinsic value, the team often looks for companies they believe are misunderstood because of short-term problems or other invest
With a market capitalization of roughly $2 trillion, Apple (AAPL) is too big for most investors to ignore. Even with its up and down performance so far in 2021, as market preference has shifted to more economically sensitive sectors poised to benefit from recovery, Apple remains a major driver of both equity returns and whether the market is seen as cheap or expensive.
Any investor holding a broad equity market index fund owns a generous helping of Apple. It consumes nearly 5% of the Morningstar U.S. Market Index which counts 1,439 stocks its share price having appreciated by more than 80% in both 2019 and 2020. For other broad indexes reflecting the higher end of the U.S. equity market, Apple’s weight can reach 6%. Thanks to strong iPhone demand and a sticky customer base, Apple flourished both before and during the pandemic. Investors are slated to get the latest read on Apple’s earnings on Wednesday, April 28.
As the first quarter of 2021 draws to a close, U.S. stock funds are recording eye-popping one-year returns. Over 2,000 U.S. equity funds finished March up 50% or more from a year ago.
While certainly striking, investors should take these returns with a grain of salt, and the situation highlights a major quirk in shorter-term rolling returns. Essentially, the returns reflect the combination of sharply lower stock market prices during the coronavirus-related market collapse one year ago and the subsequent strong rebound, resulting in what appear to be outsize returns.
In addition, when these big fund returns are put in context of a comparison benchmark, their performance is much less impressive. For example, the Morningstar US Market Index is up roughly 58% from a year ago. This reflects the importance of selecting and looking at performance relative to a benchmark.
Just 49% of the nearly 3,500 active funds included in our analysis survived and outperformed their average passive counterpart in 2020. This number isn t far off from what it was when we assessed these funds in mid-2020, reinforcing the view we shared then: There s little merit to the notion that active funds are more capable of navigating market volatility.
We further analyze these findings in the year-end 2020 installment of the Morningstar Active/Passive Barometer, a semiannual report that measures the performance of U.S. active funds against passive peers in their respective Morningstar Categories. The Active/Passive Barometer spans nearly 4,400 unique active and passive funds that accounted for approximately $15.9 trillion in assets, or about 67% of the U.S. fund market, as of the end of 2020. Morningstar Direct clients can access the full report here.