Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Bill Nygren: Nygren: Investors’ Once-in-a-Generation Opportunity
I like Oakmark. However, aside from the fact he watches CNBC (?), don't see much profound here. Yep, bonds are perilous at these %#!*# rates. I been saying that awhile. Can't comment on valuations - but suspect he's right. Maybe the most important point here is that one year's darn short time to observe market(s) and draw any type of conclusion. Got me thinking: There's planets out there where a year's 1000 days long. Now, if we lived on one of them, would that change our perspective?
Bill Nygren is a contrarian indicator. He insisted that most of 2008 was a great buying opportunity, all the way down, and he thought financials were a steal and backed up the truck. This is the genius that held an 18% (!!) position in Washington Mutual (WAMU) in his Oakmark Select fund and rode it down to bankruptcy.
Don't try convincing people like DlphcOral that Nygren is a good value investor. People like him will always blame Nygren for their own mistakes. I nevrer understood why these great investors use mutual funds (managers) to invest for them when they know so much more than the manager themselves. People make mistakes and Nygren says and always has said they will make mistakes, but over the long term (and that doesn't mean 3-5 years) they should be rewarded. Most people are too ignorant to know what that means and thats why they run down the names of good people like Nygren. Nothing new here.
Are you a bit edgy about using a real name, today? This house is not and has not been invested in any Oakmark funds. I will presume DO's notes about the funds/manager in question are accurate and is expressing reasons for not choosing to use those funds. We each use our own criteria to determine why we do or do not invest in a particular area or fund, eh? I don't find this a reason to be snippy with the reply.
I don't remember my account user name and wanted to reply. If you're interested my name is Mike. Maybe my reply sounded snippy and I'm sorry if it was. It's just I've never seen a post about Bill Nygren or Oakmark without someone blasting Nygren about WM. What good does this do for anyone to constantly blast a guy for one mistake? Seriously, what good does this do? Does it help anyone? My feeling is that most people who blast Nygren and run his name down are people who should be blaming themselves, not him. If they knew more about WM than Nygren then why on earth would they invest in it? If they didn't invest in OAKLX than why blast him for any mistakes that never effected them.
Also anyone can cherry pick a time frame to make returns look good or bad. DlphcOracl picked the beginning of 2007 to present. I'll pick the beginning of 2008 to present. I'll also pick life of fund. I'd rather own OAKLX than the S&P 500 anyday. Disclosure- I have a Roth IRA in OAKWX.
I'm certainly not at all against criticizing fund managers (Leuthold spending a lot of time talking to the press about what a great time it was to invest last year while at the same time the Core fund was not having a good year, nor did the main Leuthold funds handle 2008 as well as hoped), but I think it's rather interesting - and this is a generalization - that managers who simply have a bad year in general are less likely to be discussed as widely or as long as managers who have a bad year because of one larger bet. Janus Overseas did about as badly as Fairholme last year on a % basis, but Overseas wasn't discussed all that much - however, Berkowitz and his specific bad bet on financials got a ton of press. Additionally, as for Nygren, some continue to point to Wamu (which was admittedly a disaster if I remember correctly he doubled and tripled down on) three years or so later. If Nygren had an equally bad year in general the Wamu year without investing in Wamu, would that be discussed to the same degree?
My experience with Oakmark were in OAKBX and OAKGX, both of which I've been happy with. However, it appears Nygren manages a fund concentrating mostly on growth. These will give you a choppier ride. I generally don't like those funds at my age. But, for a young whippersnapper they are probably the way to go. Long as the wild swings don't turn your stomach too much. Over long periods should do better. Than again I don't give anybody all my $$. Spread it around different houses and managers cause you never know. These guys subject to the same human frobles as all of us. I do strongly disagree with personalizing differences, as there's room for everybody's opinions. Catch I think addressed that nicely (well, nicer than I would).
Reply to @DlphcOracl: According to M* (as of 12/31/2011), 5 year total return for OAKLX was -0.67% (annualized). That translates to -3.3% for the 5 year period cumulative. I don't know where you got 15%. That put the fund in 44 percentile. S&P 500 returned -0.25% annualized and the peer large blend group returned -0.99%
For the 3 year period the fund returned 20.82% annualized vs 14.11% for S&P 500 vs 13.18% for the peer group. This performance falls to 3rd percentile.
For the 1 yr period the fund is in 16th percentile, for the 10 year period it is in top 19% and for the 15 year period it is in top 1 percent. Not bad.
1. 'Investor' is correct with regard to Bill Nygren's results with OAKLX over the 5-yr period from 2007 through 2011. His fund is down -3.3% rather than the -15% I had claimed. I apologize for my error.
2. My point is singling out Bill Nygren's dismal results in 2008 is not to "cherrypick" a particular time frame or mistake, as the hysterical poster 'anonymous' claimed. Rather, it is to illustrate how Bill Nygren fared the last time he proclaimed that something (in this case, financial stocks in general and Washington Mutual in particular) were "significantly undervalued" and strongly advised buying throughout their bear market collapse. Didn't work out very well, did it? Every asset and fund manager will make mistakes but few have the hubris to proclaim that we are at "a buying opportunity of a lifetime" for equities. Even fewer have the hubris to take and maintain an 18% position in a stock that had obviously collapsed and broken all technical support levels.
3. While Bill Nygren may believe that this is the "buying opportunity of a lifetime" and that equities are "significantly undervalued" other skilled and knowledgeable money managers, e.g. Jeremy Grantham of GMO, believe that the market is overvalued at current levels. Bill Nygren's opinions in his recent Letter to Shareholders are not shared by the majority of fund and asset managers whose opinions I respect. While market performance in 2012 and 2013 may subsequently prove Nygren to be a genius I certainly would not be piling into equities, abandoning investing discipline or significantly changing the balance in one's overall asset allocations based on Nygren's opinions.
P.S. Oh, and for the record, I have never been invested in a fund managed by Bill Nygren.
Just to make sure that we are on the same page: Jeremy Grantham of GMO in November 2011 (the latest time he did it) gave the list of expected returns for equities and bonds for the next 7 years. He expects large cap US stocks to grow 2.1% per year, US high quality stocks to grow 5.6% per year, international stocks (large, small and emerging) grow at about 6% per year, and all bonds except emerging markets to fall about 1% per year. In other words, he expects stocks to significantly outperform bonds, in agreement with the point of view of Nygren.
It is true that Nygren sometimes make strong bets. Sometimes he makes mistakes, sometimes he wins a lot. For the record, I invest in OAKLX.
In his recent quarterly letter of December 2011 Jeremy Grantham states the he believes fair value for the S&P 500 is 975-1000, i.e., the market is 25% overvalued, and that current levels are being sustained by corporate profit levels that are unsustainably high. FWIW, Dr. John Hussman makes the latter point as well and that corporate levels will/must decline in the near future. Both Grantham and Hussman believe that this will be a catalyst for lower equity prices and lower levels in the major indices.
You are correct in saying that GMO predicts an average annual return of 5.6% for high-quaity U.S. stocks and that bonds will be essentially flat over the next 7 years. I suspect that Grantham believes much (? most) of this return will come from dividends that are reinvested and compounded.
Comments
No thank you.
Are you a bit edgy about using a real name, today?
This house is not and has not been invested in any Oakmark funds. I will presume DO's notes about the funds/manager in question are accurate and is expressing reasons for not choosing to use those funds. We each use our own criteria to determine why we do or do not invest in a particular area or fund, eh?
I don't find this a reason to be snippy with the reply.
Regards,
Catch
Also anyone can cherry pick a time frame to make returns look good or bad. DlphcOracl picked the beginning of 2007 to present. I'll pick the beginning of 2008 to present. I'll also pick life of fund. I'd rather own OAKLX than the S&P 500 anyday. Disclosure- I have a Roth IRA in OAKWX.
For the 3 year period the fund returned 20.82% annualized vs 14.11% for S&P 500 vs 13.18% for the peer group. This performance falls to 3rd percentile.
For the 1 yr period the fund is in 16th percentile, for the 10 year period it is in top 19% and for the 15 year period it is in top 1 percent. Not bad.
1. 'Investor' is correct with regard to Bill Nygren's results with OAKLX over the 5-yr period from 2007 through 2011. His fund is down -3.3% rather than the -15% I had claimed. I apologize for my error.
2. My point is singling out Bill Nygren's dismal results in 2008 is not to "cherrypick" a particular time frame or mistake, as the hysterical poster 'anonymous' claimed. Rather, it is to illustrate how Bill Nygren fared the last time he proclaimed that something (in this case, financial stocks in general and Washington Mutual in particular) were "significantly undervalued" and strongly advised buying throughout their bear market collapse. Didn't work out very well, did it? Every asset and fund manager will make mistakes but few have the hubris to proclaim that we are at "a buying opportunity of a lifetime" for equities. Even fewer have the hubris to take and maintain an 18% position in a stock that had obviously collapsed and broken all technical support levels.
3. While Bill Nygren may believe that this is the "buying opportunity of a lifetime" and that equities are "significantly undervalued" other skilled and knowledgeable money managers, e.g. Jeremy Grantham of GMO, believe that the market is overvalued at current levels. Bill Nygren's opinions in his recent Letter to Shareholders are not shared by the majority of fund and asset managers whose opinions I respect. While market performance in 2012 and 2013 may subsequently prove Nygren to be a genius I certainly would not be piling into equities, abandoning investing discipline or significantly changing the balance in one's overall asset allocations based on Nygren's opinions.
P.S. Oh, and for the record, I have never been invested in a fund managed by Bill Nygren.
It is true that Nygren sometimes make strong bets. Sometimes he makes mistakes, sometimes he wins a lot. For the record, I invest in OAKLX.
In his recent quarterly letter of December 2011 Jeremy Grantham states the he believes fair value for the S&P 500 is 975-1000, i.e., the market is 25% overvalued, and that current levels are being sustained by corporate profit levels that are unsustainably high. FWIW, Dr. John Hussman makes the latter point as well and that corporate levels will/must decline in the near future. Both Grantham and Hussman believe that this will be a catalyst for lower equity prices and lower levels in the major indices.
You are correct in saying that GMO predicts an average annual return of 5.6% for high-quaity U.S. stocks and that bonds will be essentially flat over the next 7 years. I suspect that Grantham believes much (? most) of this return will come from dividends that are reinvested and compounded.