Friday, January 21, 2005

Oakmark/Loomis Sayles Funds

Several interesting investment manager calls this week. Bill Nygren of the Oakmark family is prototypical of the kind of investment manager you should want to have running your active money. He has an uncanny ability, like many great managers, to communicate the "heart and soul" of his investment philosophy and approach. He describes his philosophy and differentiates himself as value manger in this environment in a very simple way. He trys to "buy great companies at average prices" while other value mangers focus on "buying average companies at low prices". He is a fundamental investor with the patience and confidence to wait for the market and stock prices to converge with the fundamental value he sees in a company. He also seems like a humble fellow who can honestly and constructively recognize and address issues in the portfolio. He gave a very rationale explanation for why he chose to eliminate Merck from his portfolio (range of possible outcomes from Vioxx litigation made the downside volatility of future outcomes for this stock greater than other choices in the industry). Bill also seems to have a very distinct investment thesis for each stock in the portfolio and seems very unaffected by the behavioral activity in the market. Bill thinks equities are fairly valued today and finds quality spreads very narrow. He described their rational for the re-opening of the Oakmark Select Fund and carefully described the different target investors they have in mind for both Oakmark and Oakmark Select. Read Bill's quarterly commentary and you will get a strong sense for who he is.

Also found the Bond guys at Loomis Sayles very adept in their markets. Dan Fuss, domestic bonds, seems to share the consensus view that rates will rise in an orderly manner over the next few years ( Fed funds 3%, 10 Year Treasury 5.25%, long Bond 6%). He sees credit spreads as being tight but reasonable given credit trends. He sees leverage as the big problem in the market. The carry trade and proliferation of leverage vehicles makes it very difficult for the Fed to tighten aggressively. David Rolley, the global guy, sees appreciation potential in Asian currencies but thinks timing is an issue, Global growth otherwise not so hot. Risk of bond bear markets all over. Both these guys very facile in their market intellect and straightforward thinkers and communicators. Some good material and detail at L&S.

PBS transcript of Social Security smackdown with Paul Krugman and Jim Lovell interview detailing his votes for best managers..not surprised to see Bill Nygren on it.


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