August 7, 2006
Perfectly Imperfect Timing
Fund’s Fine Line: Wrong or Just Early? by Ian McDonald
“There’s a fine line between being early and being wrong. There are lots of investors who don’t have the patience to see our strategy be out of favor for multiple years. I see a lot of similarity to the situation we were in during the late 1990s. … By March 2000, when our strategy started working, we had a lot fewer investors. … In the late 1990s, the Oakmark fund saw about three-quarters of its assets redeemed during a period where the fund’s net asset value was flat.” — Bill Nygren [ed. emphasis mine]
Cat: | Time: 12:35 pm (utc+8)
August 7th, 2006 at 7:05 pm
What’s remarkable about that interview is Nygren’s complacency. And judging by Bill Miller and Nygren and Wally Weitz, investing in cyclical companies is by definition not “value investing.” When did that happen? Peter Lynch invested in cyclical companies, and so does Marty Whitman.
August 8th, 2006 at 2:53 pm
bjk: Nygren did OK in 2003 (up 25.3%) and 2004 (up 11.7%); it was only last year (down 1.3%) that returns started getting stinky. The point is it seems folks don’t have any patience and underperformance for even a short amount of time (like a year or two) results in mass redemptions.
August 8th, 2006 at 11:32 pm
I get that, but he talks about stock picking when he acknowledges that sector picking is what really determines his performance.
August 9th, 2006 at 6:21 am
bjk: Where does he acknowledge that sector picking is what really determines performance? (I’ve heard Bill Miller say that by missing the run in Energies he has done his investors a disservice, but I don’t think that nullifies the idea of picking stocks regardless of sector.)
August 9th, 2006 at 10:12 am
He assumes that sector risk whether he recognizes it or not. And if you’re not an absolute return investor, it’s very hard to beat the market when you avoid energy, cyclicals, metals, REITs, not to mention the 1000% rockets like HANS and CME. And take the stocks he does invest in, like Dell. What does Nygren know about the future of the PC? He thinks he’s betting on a company when he’s really betting on a market, which is a much bigger and unknowable risk. Dell is not selling sugar water. It could be a lot more like Wang or Digital or IBM or Sun or on and on.