Investing

Value Investor Bill Nygren Continues to Sell Financials and Move Into These 3 Sectors

Will Ashworth

Published: January 14, 2025 9:45 am

Bill Nygren has managed the Oakmark Select Fund (MUTF:OAKLX) since its inception in November 1996. He joined Harris/Oakmark in 1983, two years after entering the investment industry, and is now the firm’s Chief Investment Officer. 

The portfolio manager manages billions of assets. Oakmark Select had $6.68 billion invested across four share classes as of Sept. 30, 2024. 

Nygren and the two other portfolio managers handling investment decisions for the fund have net assets focused on just 22 large and mid-cap companies. Many of these companies are financial services companies. By weight, the fund had nearly a third of its net assets invested in financial stocks at the end of Q3 2024. 

Given such a high weighting in one sector, it’s unsurprising that Nygren decided to trim the fund’s financial holdings in the quarter. He moved the proceeds into stocks in these three sectors.  

Key Points About This Article:

• Oakmark Select reduced its financial services and real estate positions during the third quarter, putting most of the proceeds into energy.  
• Bill Nygren sold off 17% of CBRE Group (NYSE:CBRE), its biggest positive contribution in Q3 2024.
• The value investor nearly doubled its stake in Apache (NYSE:APA), an oil and gas producer.
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

Real Estate Delivers for Nygren

Oakmark Select has a median market cap of $51.7 billion, which, while quite large, allows the fund to hold smaller stocks. According to Morningstar, just 39% of the portfolio is invested in large-cap stocks, while mid-caps account for 45% and small-caps for the remaining 16%. 

Nygren is one of the better value investors over the past 25 years. As a result, it’s not surprising that 42% of the fund’s assets are value stocks, while growth stocks account for just 9%; the remaining 49% are a blend of the two. 

Nygren and his colleagues aim to find stocks trading below their estimated intrinsic value so that over time, the share price converges with the intrinsic value, and they deliver profitable returns for their investors. 

In Oakmark Select’s Q3 2024 quarterly commentary, Nygren et al. reminded investors that CBRE Group (NYSE:CBRE) was the top contributor to the fund’s gains during the quarter. 

“The U.S.-headquartered real estate services company’s stock price rose following the release of positive second-quarter results, with revenue, earnings per share and free cash flow exceeding consensus expectations,” the commentary stated. 

However, despite the portfolio managers’ confidence in the real estate company and its business plan and growth strategy, the fund sold off 17% of CBRE’s shares during the third quarter, opting to invest the funds elsewhere.

Five of the nine stocks it trimmed in the quarter were financial services-related companies, including CBRE, which is officially part of the real estate sector.

Where Did the Proceeds Get Allocated?

As the headline states, three sectors got major top-ups during the quarter: Energy, Industrials, and Technology. I’ll detail the two lesser additions in this section and then discuss the significant bet in the next section. 

First up is Deere & Co. (NYSE:DE), the farm and construction equipment company making waves with its move to deliver driverless tractors and combines to help crop farming become autonomous by 2030. 

The industrial stock isn’t doing this out of the goodness of their hearts. It expects to generate 10% of its annual revenue from recurring software subscriptions farmers buy to maintain and operate the vehicles.

Perhaps, seeing the future, Oakmark Select increased its Deere position by nearly 30% in the third quarter. It is now the fund’s fifth-largest position. 

The other sector making waves in the quarter was technology. In Q3 2024, Nygren added 119,000 shares of Salesforce (NASDAQ:CRM), raising the software firm’s weighting in the fund by 39 basis points to 5.03%. It is the ninth-largest holding.   

My best guess for Nygren increasing the fund’s position is that it sees Salesforce’s margins continuing to benefit from its AI strategy. 

Energy Gets the Lion’s Share

Although Phillips 66 (NYSE:PSX) and Apache (NYSE:APA) are only Oakmark Select’s 15th and 16th-largest positions, respectively, they were two of Nygren’s most significant additions during the third quarter. 

The fund increased its stake by 22.75% in Phillips 66, the Houston-based owner of refineries and gas stations. It now owns 1.91 million shares of the company, accounting for 3.76% of the portfolio.

I don’t know if Nygren knew about Phillips 66’s impending $2.2 billion acquisition of pipeline operator EPIC NPL, announced on Jan. 7; it will help keep the stock moving higher. 

Now for the biggest move of the quarter. 

Oakmark Select increased its position in Apache by 94.52% to 8.19 million shares, accounting for 3.0% of its holdings. 

With Apache stock down nearly 30% over the past 12 months, Nygren and his colleagues are likely buying before oil prices increase. In the first nine months of 2024, Apache’s EBITDAX (earnings before interest, taxes, depreciation, amortization, and exploration expense) was $4.37 billion, 12% higher than a year earlier. 

That said, Apache did say in its Q3 2023 press release that it was cutting its capital expenditures to $2.55 billion in 2025 at the midpoint of its guidance due to a softer price outlook for oil.