Decoding Oakmark's Q4 2025 Moves: A Value Investor's Checklist

The Oakmark approach is a classic playbook, built on the conviction that durable wealth is created by buying pieces of businesses at a meaningful discount to what they are truly worth. This philosophy, cultivated for over four decades, demands three non-negotiable criteria for every investment: a significant gap between price and intrinsic value, a clear path for per-share value to grow, and management teams that think and act like owners. It is a discipline that treats every stock purchase as a genuine business acquisition, not a speculative trade.

This rigorous, committee-vetted process is the engine of discipline. It begins with generalist analysts conducting intensive fundamental research across industries to generate ideas. But the real filter is the investment committee, where seasoned professionals debate the merits of each opportunity. Only ideas that survive this rigorous scrutiny are used to build client portfolios. This structure ensures that theses are tested and that the fund's capital is deployed only when the margin of safety is compelling.

The fund's recent equity allocation of 60.0% reflects a measured stance, but the active search for undervalued companies is constant. The team continues to find attractive opportunities across a variety of industries, including areas that have been left behind in the past year's momentum rally. This focus on overlooked segments is a direct application of the value principle: when market enthusiasm concentrates on a few leaders, the most promising bargains often lie elsewhere. The fund's recent performance, which outpaced its benchmark in the fourth quarter, underscores the potential of this patient, owner-oriented approach.

Portfolio Execution: New Buys, Final Sales, and Key Holdings

The fund's outperformance in the quarter was driven by a combination of sector rotation and specific stock selection. The equity portfolio's 5.08% return handily beat the S&P 500's 2.66%, with communication services and health care leading the charge while industrials lagged. This performance was not accidental but the result of deliberate portfolio construction, as the team executed on its value thesis through targeted new purchases and final sales.

The new buys in Amrize, Gartner, and Mondelēz reveal a clear rationale focused on durable business models and temporary headwinds. Amrize, a newly spun-off building materials giant, offers a classic value setup: a company with strong pricing power due to scale and regional dominance in cement and roofing, operating in a sector with tight supply dynamics. The purchase was made at a time when the stock was flying under the radar, creating a margin of safety. Gartner, a research leader, was acquired after its stock price fell from highs due to AI disruption fears. The team believes these concerns are overstated and that the company's strong organic growth and free-cash-flow conversion will reaccelerate, making it a bargain. Mondelēz was a play on commodity relief. The global snack maker has robust pricing power and a global footprint, but recent margin pressure from rising costs masked its true earnings power. The fund bought into the temporary weakness, betting that pricing power and cost relief would eventually improve profitability.

Conversely, the final sales of BlackRock and Charter Communications likely signal a shift in thesis or a valuation concern. For BlackRock, the sale may reflect a belief that the stock had run up from its earlier value position, or that the firm's asset management growth story had become fully priced. The sale of Charter Communications, a top detractor, is more straightforward: the stock declined sharply on disappointing earnings, and the fund's decision to exit suggests the risk/reward had deteriorated after the news.

The top contributors and detractors for the quarter highlight the fund's concentrated, high-conviction style. Alphabet was the standout performer, with its stock price jumping on strong earnings and AI momentum. Warner Bros Discovery and Glencore also added significant value. On the flip side, Fiserv was the top detractor after a strategic review led to lowered growth targets, while Equifax and Charter Communications also weighed on returns. This list of winners and losers underscores the fund's focus on companies where the intrinsic value story is either accelerating or facing a clear, temporary setback.

Financial Impact and Competitive Moats

The fund's performance in the quarter was a clear validation of its disciplined strategy. The equity portfolio returned 5.08%, decisively outpacing the S&P 500's 2.66%. This outperformance was not a broad-market windfall but the result of targeted stock selection. At the sector level, the gains were concentrated: communication services and health care were the largest contributors, while industrials was the sole detractor.

This pattern aligns perfectly with the fund's value investing framework. The top contributors-Alphabet, Warner Bros Discovery, and Glencore-represent companies with wide, durable competitive moats. Alphabet's jump was driven by earnings that beat expectations and AI momentum, reinforcing its dominant position. The fund's thesis is that these are businesses where intrinsic value is being recognized by the market, allowing for per-share value to compound over the long cycle. The strategy of buying when these companies are temporarily overlooked or undervalued, as seen with Gartner and Mondelēz, aims to capture that value accretion.

The single detractor, industrials, highlights the risks inherent in the sector. The category's underperformance likely reflects the challenges of capital-intensive businesses facing cyclical pressures or margin headwinds. Yet even here, the fund's approach is to assess whether the weakness is temporary or structural. The sale of Charter Communications, a top detractor, signals a reassessment of risk versus reward after disappointing earnings, a classic discipline move.

The bottom line is that the fund's setup is designed for long-term wealth creation, not quarterly noise. By focusing on companies with a clear path to grow per-share value and a management team that acts as an owner, the portfolio is built to compound through market cycles. The Q4 results show this patient approach can generate significant alpha when the market eventually prices in the true worth of a business.

Valuation, Risks, and Long-Term Compounding

The Oakmark portfolio's setup for long-term compounding is built on a nuanced view of value. The fund's philosophy, as articulated by its managers, rejects a simplistic dichotomy between "value" and "growth." Instead, it operates on two continuums: cheap versus expensive, and low growth versus high growth. This means the portfolio is not a collection of dull, slow-growth companies trading at rock-bottom prices. It is a blend, where the team seeks businesses that are priced at a discount to intrinsic value, regardless of their growth profile. As the commentary notes, "Buying great businesses at average prices is just as much value investing as buying average businesses at great prices." This approach explains the mix of holdings like First Citizens and Liberty Broadband, which introduce complexity and potential volatility compared to a pure value fund.

This blend inherently carries a higher risk profile. The fund's focus on medium- and lower-quality debt securities and its concentrated portfolio of relatively few stocks means it is more exposed to company-specific events and sector rotations than a broad market index. The recent underperformance of the industrials sector, which was the sole detractor in the quarter, illustrates this vulnerability. While the fund's long-term track record is strong-with the Oakmark Equity and Income Fund posting a 15.04% five-year return-this performance has been achieved with a higher degree of volatility than the market average. The fund's expense ratio of 0.89% is reasonable, but the cost of this active, concentrated strategy is measured in the potential for sharper drawdowns when the market's mood shifts.

The fund's engagement policy is a key tool in navigating this risk and acting in shareholders' best interests. The firm views each stock purchase as a genuine business acquisition, and this mindset extends to ongoing dialogue with management. As stated, "discussing relevant issues that may affect the company's long-term performance is part of our due diligence process." This engagement begins before an investment and continues throughout. The policy is direct and private; when disagreements arise, the team initiates a conversation rather than a public fight. The ultimate lever, however, is clear: "unsatisfactory or insufficient change by the company will generally be met with divestment." This is not a passive ownership stance but an active stewardship model designed to maximize the expected value of each investment.

For the patient investor, the bottom line is one of disciplined opportunity. The portfolio is constructed to compound per-share value over the long cycle, but it does so by accepting a higher level of volatility than a pure index fund. The fund's ability to outperform in a quarter, as seen with its 5.08% return, demonstrates the payoff when its value-tilted, owner-oriented approach identifies mispriced opportunities. Yet the recent difficulty for active managers to beat the S&P 500, as noted in the performance data, is a reminder that the market's recent trend has favored momentum. The Oakmark strategy is built for the longer arc, where the margin of safety and the quality of the business moat eventually matter more than short-term price noise.

Catalysts and What to Watch

The fund's recent outperformance provides a strong validation of its value-tilted, owner-oriented approach. The key catalysts for the coming quarters will be the fund's ability to sustain this success by identifying new opportunities and navigating evolving market leadership. The recent underperformance of the industrials sector, which was the sole detractor in the quarter, is a critical watchpoint. The fund's strategy is to find bargains in overlooked areas, and its ability to redeploy capital into this sector-where it recently sold Charter Communications-will test its thesis that some weakness is temporary. Success here would demonstrate the discipline of buying quality at a discount, even when the broader market is focused elsewhere.

Another major factor is the shifting composition of the S&P 500 itself. As noted in the firm's recent thought piece, the index is no longer the same as it once was. This evolution creates both risk and opportunity. For Oakmark, the blend strategy-combining value and growth elements-could generate alpha if market leadership rotates away from the mega-cap tech dominance that has defined recent years. The fund's continued ability to find undervalued companies in areas left behind by momentum rallies will be essential. If the market's focus broadens, the fund's concentrated portfolio of medium- and lower-quality debt and select equities may be well-positioned to capture value.

Finally, investors should track the engagement policy in action. The firm's direct, private conversations with management are a core tool for stewardship. When disagreements arise, the stated path is clear: unsatisfactory change leads to divestment. This policy is not just a principle but a potential catalyst for portfolio change. Watch for instances where this engagement leads to tangible improvements in a company's strategy or capital allocation, which could unlock value. Conversely, if engagement fails to move the needle, it may signal the need for a sale, as seen with Charter Communications. The effectiveness of this hands-on approach will be a key indicator of whether the fund's active management continues to add value in a market that has often favored passive strategies.