This document provides a comprehensive overview of the Oakmark Select Fund's performance during the fourth quarter of 2025, detailing key drivers, significant contributors and detractors, and strategic portfolio adjustments. It also offers insights into the fund's investment philosophy and outlook for future opportunities.
Unlocking Value: A Quarterly Insight into Investment Performance
Fund Performance Highlights and Benchmark Comparison
The Oakmark Select Fund, specifically its Investor Class (OAKLX), achieved notable success in the recent quarter. It surpassed the performance of its designated benchmark, the S&P 500 Index, not only for the three-month period but also since its inception. This robust outperformance underscores the effectiveness of the fund's investment strategy and its ability to generate superior returns over time.
Sectoral Contributions and Detractions
An in-depth analysis of the fund's performance by sector reveals that the communication services and financial sectors were the primary engines of growth. These sectors made substantial positive contributions to the overall returns, highlighting successful stock selections within these areas. Conversely, the industrials sector was the sole segment that experienced a decline, acting as a detractor from the fund's otherwise strong performance.
Identifying Undervalued Opportunities
Despite recent market trends favoring momentum-driven investments, the fund continues to uncover compelling opportunities in companies whose true value is not yet reflected in their stock prices. These undervalued enterprises span a diverse range of industries, including some that have been overlooked in the broader market's recent upward trajectory. The fund's managers are committed to leveraging these insights to build a resilient and growth-oriented portfolio.
Key Influencers: Top Contributors
Among the top performers, Warner Bros. Discovery (WBD) stood out as the leading contributor. The media giant's stock surged amid multiple acquisition offers for its various business units. Ultimately, WBD agreed to sell its streaming and studios division to Netflix, while spinning off its global networks to shareholders. A subsequent bid from Paramount Skydance for the entire company further highlighted the intrinsic value being recognized. The fund's management remains actively engaged in monitoring these developments, confident in the board's efforts to enhance shareholder value.
Key Influencers: Top Detractors
On the other end of the spectrum, Paycom Software (PAYC) was the primary detractor. The human resources software provider experienced a decline in its stock price, mirroring broader underperformance within the application software sector. Despite this setback, the fund maintains a long-term bullish view on Paycom, believing in its significant growth potential. The management team also emphasizes that system-of-record software companies like Paycom are unlikely to be displaced by artificial intelligence. Share repurchases initiated by Paycom's management are seen as a positive step, expected to add substantial per-share value.
Strategic Portfolio Adjustments: New Acquisitions
During the quarter, the fund strategically added Targa Resources (TRGP) to its portfolio. Targa is a prominent player in the midstream natural gas and natural gas liquids (NGL) sector, controlling a significant portion of the fractionation capacity in Mont Belvieu, a major NGL hub. The company benefits from geographical advantages and high barriers to entry, with approximately 90% of its earnings derived from multi-year, fee-based contracts. This structure provides a hedge against supply fluctuations. Although concerns about Permian oil production growth have impacted its share price, the fund believes Targa is well-positioned for growth, even in a slower Permian environment, and was acquired at an attractive discount.
Strategic Portfolio Adjustments: Final Divestitures
The fund concluded its positions in several holdings, including Charter Communications Class A (CHTR), GCI Liberty Class C (GLIBK), and Liberty Broadband Class C. These divestitures reflect ongoing portfolio optimization, ensuring the fund remains aligned with its core investment philosophy and current market outlook.
Annualized Returns and Expense Ratios by Class
The table below provides a detailed breakdown of the average annualized total returns for different classes of the Oakmark Select Fund, including Investor Class (OAKLX), Advisor Class (OAYLX), Institutional Class (OANLX), and R6 Class (OAZLX). Each class shows its performance over various periods, from the quarter-to-date (QTD) and year-to-date (YTD) to 1, 3, 5, and 10 years, as well as since inception. The S&P 500 Index and Russell 1000 Value Index are included for comparative purposes, illustrating the fund's relative performance against key benchmarks. Additionally, the expense ratio for each fund class is provided, reflecting the costs associated with managing the investment. These figures offer investors a clear view of both the historical returns and the operational expenses of the different fund offerings.
Important Disclosures and Investment Considerations
The information presented in this report is for informational purposes only and is based on the views and investments of the portfolio managers and Harris Associates L.P. as of the specified date. Future results are not guaranteed and are subject to investment risks. The S&P 500 Index and Russell 1000® Value Index are unmanaged benchmarks that investors cannot directly invest in. Investing in the fund carries risks, including the potential for principal loss, and value stocks may underperform growth stocks. Non-diversified funds can experience higher volatility. Before investing, carefully review the fund’s prospectus for complete information on objectives, risks, fees, and expenses.
