WDAY - Oakmark Equity And Income Fund: Q2 2024 Commentary

2024-07-19 05:10:00 ET

Summary

• We are value investors. In constructing portfolios for our clients, we seek out companies that we believe are trading in the market at significant discounts to their underlying value. These businesses must offer significant profit potential and be run by managers who think and act as owners.
• The Fund returned -2.19% versus 1.11% for the Lipper Balanced Fund Index for the quarter, and 9.51% since inception, versus 6.94% for the Lipper Balanced Fund Index over the same period.
• The equity portfolio returned -3.97% for the quarter, versus 4.28% for the S&P 5001 partly due to our underweight exposure to the technology sector and the significant underperformance of value stocks versus growth. The fixed income portfolio returned 0.75%, and the Fund allocation was 58.0% in equities, 40.7% in fixed income, and 1.3% in cash. (The equity and fixed income portfolio returns are unaudited and sourced from our proprietary account system.).
• At the sector level, the largest contributors were communication services and information technology, while detractors were health care and consumer discretionary.
• Higher interest rates have improved the opportunities available in fixed income, and we continue to find idiosyncratic issues that meet our undervaluation criteria.

Top contributor | Detractor

Top contributor

Alphabet ( GOOGL ) was the top contributor during the quarter. The stock price rose after the U.S.-based communication services company reported first-quarter operating income growth of 31% versus the prior year. We believe that management's cost reduction initiatives will improve operating efficiency and lead to faster earnings growth. In addition, we expect the company's new AI-powered features, showcased at the recent Google I/O conference, will increase the value of its products to users. At its current share price, we continue to see upside to our estimate of Alphabet's intrinsic value....

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