Oakmark Funds, an investment management firm, published its “Oakmark Fund” third quarter 2021 investor letter – a copy of which can be seen here. A return of 1.9% was reported by the fund in the third quarter of 2021, compared to a 0.6% gain for the S&P 500 Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Oakmark Fund, in its Q3 2021 investor letter, mentioned PACCAR Inc (NASDAQ: PCAR) and discussed its stance on the firm. PACCAR Inc is a Bellevue, Washington-based manufacturing company with a $31.2 billion market capitalization. PCAR delivered a 4.31% return since the beginning of the year, while its 12-month returns are down by -0.66%. The stock closed at $90.00 per share on November 5, 2021.
Here is what Oakmark Funds has to say about PACCAR Inc in its Q3 2021 investor letter:
“We added just one new position to the portfolio during the third quarter: Paccar. We believe Paccar is a well-managed, high-quality global commercial vehicle manufacturer that trades at a low multiple of normalized earnings. Paccar has consistently grown its earnings power via market share gains, improved margins and above-average growth of its highly profitable parts and services business. Despite operating in a cyclical industry, the company has been profitable for 82 consecutive years while steadily generating higher peak and trough EPS through each successive cycle. We had the opportunity to purchase Paccar at what we believe is an attractive price due to transitory concerns related to Covid-19-induced supply chain pressures, elevated cyclical uncertainty and the longer term impact of powertrain electrification on the business. We believe our long time horizon provides a significant advantage as we are able to look through the short-term headwinds and focus more on what Paccar should earn on a mid-cycle basis. Furthermore, while we do expect increased commercial vehicle electrification over time, we believe the company is well positioned to integrate new propulsion systems to meet customer demands.”
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Based on our calculations, PACCAR Inc (NASDAQ: PCAR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. PCAR was in 28 hedge fund portfolios at the end of the first half of 2021. PACCAR Inc (NASDAQ: PCAR) delivered a 12.64% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
