Bill Nygren’s Interview With The Motley Fool by Oakmark Funds

H/T Dataroma

Value investor Bill Nygren has 34 years of investment experience, including eight years as director of research at Harris Associates. Now a partner at Harris, he is also portfolio manager at the Oakmark Fund, Oakmark Select Fund, and Oakmark Global Select Fund. As of December 31, 2015, assets under management at Harris Associates were about $123 billion, and the Oakmark fund family had about $75 billion. Nygren’s many accolades include being named Morningstar’s domestic stock manager of the year in 2001.

Bill Nygren

Q&A with Bill Nygren

Fool analyst John Rotonti recently interviewed him about the qualities he looks for in companies and management teams, the best indicators of stock outperformance, and how he likes to value businesses.

John Rotonti: What’s your definition of a high-quality business?

Bill Nygren: Oakmark would consider a business to be high-quality if it had many of the following attributes:

  • high return on incremental invested capital
  • high free cash generation
  • above-average growth opportunities
  • competitive advantage not subject to replication
  • low cyclicality
  • low risk of obsolescence

I’m no doubt missing other important characteristics, but you get the idea. More importantly, however, is that there is a big difference between a high-quality business and a great stock, and that difference is stock price. Just as consumers do, we are always making trade-offs between price and quality.

 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Rotonti owns shares of Alphabet (C shares), Apple, and MasterCard. The Motley Fool owns shares of Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, Ford, and MasterCard.

The full article is also available on The Motley Fool website here.

The holdings mentioned above comprise the following percentages of the funds’ total net assets as of 12/31/15:

SECURITY Oakmark Fund Oakmark Select Fund Oakmark Global Select Fund
3G 0% 0% 0%
Alphabet Cl A 1.0% 0% 0%
Alphabet Cl C 2.3% 8.0% 7.6%
Amazon 0% 0% 0%
Apple 2.0% 0% 0%
Fiat Chrysler 1.3% 3.0% 0%
Fiat Chrysler Auto NV- Convertible Bond 7.875% Due 12/15/16 0% 0.9% 0%
Ford 0% 0% 0%
General Motors 1.6% 0% 0%
Goldman Sachs 1.8% 0% 0%
Liberty Interactive QVC CL A 1.9% 4.3% 0%
Liberty Media 0% 0% 0%
MasterCard Cl A 2.5% 5.1% 4.7%
Samsung 0% 0% 4.0%
Wal-Mart 0% 0% 0%

 

Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.