Tag Archives: Bill Nygren

Bill Nygren on Value Investing, the Attractiveness of Financials, and Learnings from Different Perspectives

Noted mutual fund manager Bill Nygren of the Oakmark Select fund thinks that long term equity investors can “expect a mid- to upper-single digit minimum return in the market” looking ahead, but notes that tilting one’s portfolio to large cap financials (Citigroup, Bank of American and JP Morgan are all in Nygren’s top 10 holdings) could help produce better returns than the market. Banks, Nygren believes, will benefit once interest rates increase. As rates rise, deposit rates should increase and interest charged by banks for loaning out money also should go up, both helping the earnings power of financials.

Nygren also discusses his investment process, which starts with taking a long term, fundamental view. “We’re looking to identify companies that today are selling at a large discount from what we believe they can be worth five to seven years from now. We’re looking for companies where we expect that per share value to grow over time. And we’re looking for companies where management is on the same side as shareholders,” he says. Nygren, who is considered a value manager, doesn’t shy away from buying stocks that have higher multiples if he thinks the stock trades below the company’s intrinsic value.

When asked about his biggest mistake in investing, Nygren offers some interesting insights. He said early in his career he only thought he could learn from studying other value investors. However, what he has realized is that you can learn from others who do things differently. He says “If you read about how someone thinks or approaches something completely different from the way you approach it, you can learn more. It can increase your confidence in how you’re doing things or you can say that’s a neat way of thinking and if I apply that to what I do it would be a slight change.”


Nygren: Relax, and Rebalance

Much of the speculation about the reason for the market’s recent plunge has been that investors are downright scared about China’s slowing growth. But top mutual fund manager Bill Nygren says the sort of correction we’ve seen recently is simply a part of life when you are investing in stocks. And from a long-term investing perspective, he does not think China’s slowdown will have as big an impact as many believe.

“I think sometimes we just forget that the market doesn’t really need a reason to have a 10% correction, which we basically had over the past four trading days,” Nygren tells Morningstar. “They occur pretty frequently–about once every year and a half, on average, historically–and they are really nothing for investors to worry about as they are pretty common.”

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As for China, Nygren laid out some interesting numbers regarding its slowdown’s possible impact on the US. “For long-term investors … where we’re trying to estimate the value of a business five to seven years from now, it’s hard to imagine China being important enough to cause a 10% reduction in values,” he explained. He says China accounts for about 16% of world GDP, so a 5% to 10% change in Chinese output would represent a 1% hit to global GDP, and an even smaller impact on US multinational firms. “We’re seeing this as increased opportunity of values falling substantially less than prices,” he says.

Nygren says that, historically, the stock market has been the best investment vehicle, even though there are periodic corrections and bear markets. And, he says, no one has found a way to time those declines. He says investors should use the recent market declines as a chance to rebalance their portfolios. “Over a long period of time, the best way for an individual to make sure that they can sleep at night and get through these tough periods is to have a balanced portfolio and use large moves in the market–either direction–to frequently restore balance to that portfolio,” he says. “If you don’t do that, the market is taking your portfolio out of that balanced position and giving you more risk exposure to a sector that’s already performed well and maybe getting extended. So, I think most investors should take a deep breath, know that equities are good long-term performers, and take a look at their portfolio and see if they can take advantage of it.”

Nygren also talks about the pros and cons of rising interest rates as they pertain to bank stocks, why he is high on some industrial stocks, and why he thinks investors are overreacting to oil price declines, creating opportunities in oil stocks.

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Bill Nygren On … Everything

GuruFocus’s two-part interview with top fund manager Bill Nygren is a must-read, offering insights into Nygren’s incredibly successful value approach.

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Why NOT To Change Your Portfolio

With the bull market now more than six years old, many investors are worrying that the end may be near. But in a recent MarketWatch column, Chuck Jaffe says investors should beware “bad motivations” for changing up their portfolios.
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Nygren Uses Oil Plunge As Bargain-Hunting Opportunity

Bill Nygren, one of the top fund managers of the past decade, says he’s been bargain-hunting in the wake of oil’s big decline.

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Nygren: This Is Why Investors (Mistakenly) Think Valuations Are Dangerous

Top fund manager Bill Nygren says that valuations don’t look bad in the stock market, and in his second-quarter letter he offers a few reasons why investors are mistakenly viewing stocks as pricey.
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Nygren: Corrections Are Normal — Don’t Panic

There’s been a lot of concern about the market’s valuation after last year’s runup and this year’s volatility, but top fund manager Bill Nygren isn’t buying it.

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