Oakmark?

[wrigley]

I routinely tune in to a local investment management company's weekend radio show. They are very high on Oakmark Funds. Any input on this company? Thanks

Mike

[Sarah in SC]

I have a significant amount of my 401k in Oakmark equity and income. I think it is a good fund.

[LOL!]

One can find everything that Oakmark (and Dodge&Cox for that matter) does at a lower price by going to Vanguard or ETFs.

At some points in the distant past, I owned both Oakmark and D&C funds. They are both so-called "value" shops in that they tilt their investment style towards the value side of the value-blend-growth model. Once you figure that out and then compare their performance to value indexes, they come out slightly behind the indexes because of their higher expense ratios. Their e.r.'s are low compared to the "average" mutual fund, but not compared to index funds.

Furthermore both Oakmark and D&C give out more taxable distributions than the corresponding index funds, so in a taxable account, they should be avoided.

So for large cap domestic value, go with a large cap domestic value index fund. For international value, go with a int'l value ETF. Etc. When I switched, I got better returns and a lower tax bill.

[FANOFJESUS]

Oakmark Equity & Income down about 17% not to bad for a year like this.

[Animorph]

I like oakbx, oakex, and oakgx. I started my sons out with just those funds and hold them myself. They have a decently low $1k minimum. They get an "A" stewardship grade from Morningstar, with fees getting a "B". I didn't see anything I liked better.

[Gumby]

I have had OAKBX and DODBX for years. I have been greatly disappointed in the latter over the past two years.

[Sarah in SC]

Me too, Gumby. I have always been a fan of that Balanced fund, but whew! I am still buying the International one by Dodge and Cox in my 401k, though.

[REWahoo]

Count me among those disappointed by the performance of DODBX. It was a core holding in my 401k during the last 10 years leading up to my retirement, generally 50% of my AA. I reduced it to ~20% of my AA after retiring and wish I'd pared it back even more - although it did one heck of a job of self-reduction without my help.

[Gumby]

I just sold all my DODBX today and will be transferring the proceeds to OAKBX. Oakmark has been a far better steward of my money, particularly in down markets.

[Sarah in SC]

Darn it Gumby, don't make me get twitchy when I was all committed to buy and hold!

[LOL!]

So you performance chased DODBX and now you are gonna performance chase OAKBX. O-kaaa-a-a-y.

[Gumby]

Could be. Although I have given them both a fairly long test period, with my own real money, and found that OAKBX has performed better for me over the years. But if being rude makes you feel better, go right ahead.

[wrigley]

How does OAKBX compare with Vanguard Wellesley Income and Wellington?

Mike

[Gumby]

As I think about it, my prior message was perhaps too cursory. While I owe LOL no more than to lower my boxers so he has a clear shot, it might be helpful to others to set out my reasoning on both my purchase and sale of DODBX (and OAKBX).

I originally purchased OAKBX in June 2001, when I switched jobs and needed to rollover my 401k. The ongoing tech stock collapse convinced me that a 100% stock position was probably unhealthy for my net worth and I thought a balanced fund would help remedy the problem. I ran a number of screens, read many prospectuses and concluded that OAKBX and DODBX were the best choices in actively managed funds (an alternative index possibility may have been a blend of VGTSX and VBMFX). At the same time, I had a roughly equivalent amount of taxable funds to invest. I was tempted to put it all in OAKBX, because it had been outperforming DODBX over the most recent year (2000 - 19.9% v. 15.1%). However, I thought that maybe Oakmark had just had a recent run of luck and the situation might reverse, as it had in 1999. So I put the taxable money in DODBX.

Over the market decline beginning on 9/11/01 and through March 2003, OAKBX outperformed DODBX in excess of 10%. During the subsequent bull market, DODBX outperformed slightly in 2003, 2004 and 2006. OAKBX was slightly ahead in 2005. Yet the lead built up by OAKBX during the 2001-2003 down market kept it well ahead in the aggregate. Still, I wanted to see if that was just a fluke.

In 2007, DODBX started to falter, largely because they were more heavily in financials. OAKBX outperformed by 12.0% to 1.7% that year. And in 2008 YTD, OAKBX has outperformed DODBX -16.7% to -32%.

In total, since I purchased both in 2001, OAKBX is up 20% and DODBX is down 25%.

Now that I have been through an entire cycle with both, it appears that the system used by Oakmark provides better results. And now that I have gathered a nest-egg and am closer to retirement, I also find that I am more interested in preservation of what I have during down markets than blazing performance during up markets. For that reason, I decided to move the taxable funds to OAKBX. It was a decision that I thought about for over a year before finally pulling the plug.

Tax loss harvesting also played a part, as I now have a capital loss built up in the DODBX position. If the holdings were reversed, such that OAKBX were in the taxable account and DODBX in the IRA, the decision would have been harder. I also want to use a small amount of the cash to fund our Roth IRA's for 2008 (after 10 years, we are finally eligible for a Roth again -- woo hoo!), which are in VGSIX (although it is down 30% YTD and 46% over the last 2 years, we need more exposure to REITs in our asset allocation).

Am I chasing performance? Perhaps, but I know of no better way to pick mutual funds than to observe them over a full market cycle and see which works better. In my individual stocks, I generally follow a Benjamin Graham value-stock approach. I am a very infrequent trader and am generally content to stick it out through bear markets. However, I have yet to figure out how to use the same approach with mutual funds, so I must of neccessity rely somewhat on performance history.

I am keeping my position in DODFX, so I do not dislike Dodge & Cox per se.

[Animorph]

Heck, Gumby and I are in active funds, so yes we're looking for some extra performance. Both of us look at the long term performance, not short term, so this isn't a classic switch every year kind of a thing.

Nonetheless, I thought LOL's comment was funny in referencing the index fund buy and hold philosophy.

[LOL!]

I recently sat through a 401(k) provider's sales pitch. They showed how great they were by describing how they picked funds for a 401(k) plan. You know:
Step 1: Find good performance
Step 2: Try to go for low fees
Step 3: Exclude index funds
Step 4: Look at manager tenure
Step 5: Look at bear market performance
...

Wait a minute! Let's go back to that step 3. When looking at OAKBX and DODBX, why didn't Gumby see how they compared to index funds over the long term?

Quote:

I ran a number of screens, read many prospectuses and concluded that OAKBX and DODBX were the best choices in actively managed funds (an alternative index possibility may have been a blend of VGTSX and VBMFX).

Anyways, as I wrote previously, I have owned these funds and have done much better after-tax by ditching them. You can search the forum for my posts about DODBX ... it's all out there.

[Gumby]

Quote:

Originally Posted by LOL! When looking at OAKBX and DODBX, why didn't Gumby see how they compared to index funds over the long term?

Who says I didn't? You make an awful lot of assumptions for someone so certain of himself.