Tracking William Nygren's Harris Associates Portfolio - Q1 2020 Update

Summary

• Harris Associates 13F portfolio value decreased from $56.4B to $36.11B this quarter.
• They increased Booking Holdings, Constellation Brands, and Facebook while reducing Regeneron Pharmaceuticals and dropping American Airlines and Arconic.
• The top three positions are Alphabet, Bank of America, and Charter Communications and they add up to ~17% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Harris Associates' 13F stock portfolio on a quarterly basis. It is based on Harris Associates' regulatory 13F Form filed on 05/15/2020. William Nygren's 13F portfolio value decreased ~36% from $56.41B to $36.11B this quarter. The portfolio is diversified with recent 13F reports showing around 200 positions although most of them are very small. There are 66 securities that are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The largest five stakes are Alphabet (GOOG) (GOOGL), Bank of America (BAC), Charter Communications (CHTR), Citigroup (C), and General Motors (GM). They add up to ~24% of the portfolio. Please visit our Tracking William Nygren's Harris Associates Portfolio series to get an idea of their investment philosophy and the fund's moves during Q4 2019.

Harris Associates currently has ~$120B under management. Its flagship mutual funds are the Oakmark Fund (MUTF:OAKMX) incepted in 1991 and the Oakmark International (OAKIX) incepted in 1992. Both funds have produced substantial alpha during their lifetimes - 12.5% annualized return compared to 10% for the S&P 500 index for OAKMX and 9.4% annualized return for OAKIX compared to 6.07% annualized for the MSCI World ex-US Index. The other mutual funds in the group are Oakmark Select (OAKLX), Oakmark Equity and Income (OAKBX), Oakmark Global (OAKGX), Oakmark Global Select (OAKWX), and Oakmark International Small Cap (OAKEX).

Note 1: The top holdings in the Oakmark International Fund are not in the 13F report as they are not 13F securities. The positions are Daimler (DDAIF), Glencore (OTCPK:GLCNF), BMW (OTCPK:BMWYY), BNP Paribas (OTCQX:BNPQF), Credit Suisse Group (CS), Continental (OTCPK:CTTAF), Intesa Sanpaolo (OTCPK:ISNPY), Lloyds Banking Group (LYG), CNH Industrial (CNHI), and Allianz (OTCPK:ALIZF).

Note 2: In an April interview, it was disclosed that Nygren is building stakes in Pinterest (PINS), Workday (WDAY), and Match Group (MTCH).

New Stakes

American Express (AXP): The small 0.49% of the portfolio position was purchased this quarter at prices between ~$69 and ~$137 and the stock currently trades at ~$102. In an interview last month, Nygren said he thinks AXP will earn between $4 and $5 per share this year and that could double in a couple of years. He also said compared to the financial crisis when the stock crashed to the low-teens, the difference now is that the firm is funded by long-term debt and so there is no risk of a liquidity crunch.

Stake Disposals:

American Airlines (AAL) and Willis Towers Watson (WLTW): These very small (less than ~1% of the portfolio each) positions were disposed during the quarter.

Stake Increases

General Motors: GM is a top-five position at 3.48% of the portfolio. It is a very long-term stake. The original position was minutely small in 2007 and it was disposed the following year. In 2013, a huge ~70M share stake was established at prices between $27 and $41. The position size peaked at ~81M shares in 2015. The stake was since sold down by ~25% at prices between $28 and $46. The stock currently trades at ~$28. Last two quarters have seen a minor increase.

Booking Holdings (BKNG): BKNG is now a medium-sized ~3% of the portfolio position. It was a minutely small stake first purchased in 2016 and was increased substantially next year at prices between $1,465 and $2,035. H1 2019 saw the stake almost doubled at prices between $1,665 and $1,880. Last two quarters had seen minor trimming. There was a ~25% stake increase this quarter at prices between ~$1,152 and ~$2,087. The stock is currently at ~$1,624.

American International Group (AIG): AIG is a 2.15% of the portfolio position first purchased in 2012 at prices between ~$23 and ~$36. The stake was almost doubled over the next two years at prices between $35 and $56.50. 2016 saw a one-third selling at prices between $50 and $66. 2017-2018 time frame saw a similar increase at prices between $37.50 and $67. The three quarters through Q3 2019 had seen a ~20% reduction at prices between $40 and $57.50 while last two quarters saw minor increases. The stock is now at ~$33.

Constellation Brands (STZ): STZ is now a ~2% of the portfolio stake. The position saw a ~50% stake increase this quarter at prices between ~$106 and ~$208 and the stock currently trades at ~$170.

Comcast Corp. (CMCSA): CMCSA is a very long-term ~2% of the portfolio stake that has been in the portfolio for well over 15 years. The first significant buying happened in 2004 when around 10M shares were purchased in the $6 to $8 price range. The interim period saw some selling but in 2011 there was a 4x stake increase at prices between ~$10 and ~$13. The next five years saw a ~80% reduction at prices between ~$12 and ~$35. 2017-2018 time frame saw the stake rebuilt at prices between $31 and $43. The three quarters through Q3 2019 had seen minor selling while the last two quarters have seen a marginal increase. The stock is now at $39.46.

Facebook Inc. (FB): FB is a 1.88% of the portfolio position. The stake saw a ~42% stake increase this quarter at prices between ~$146 and ~$223. The stock currently trades at ~$229.

HCA Healthcare (HCA): HCA is now a ~1.5% of the portfolio stake. A large stake was built over the 2016-2017 time frame at prices between $64 and $89. Q4 2018 saw that original stake reduced by ~50% at prices between ~$120 and ~$144. Next quarter also saw a ~15% stake reduction. Since then, the activity has been minor. The stock currently trades at ~$101.

Agilent Technologies (A), Berkshire Hathaway (BRK.B), BorgWarner (BWA), Capital One Financial (COF), Cenovus Energy (CVE), DXC Technology (DXC), EOG Resources (EOG), Grupo Televisa (TV), Howmet Aerospace (HWM) previously Arconic Inc. (ARNC), Humana Inc. (HUM), Lear Corp (LEA), Southwest Airlines (LUV), and Wells Fargo (WFC): These small (less than ~1.5% of the portfolio each) positions were increased this quarter.

Note: Oakmark has significant ownership stakes in the following businesses: Lear Corp and Grupo Televisa.

Stake Decreases

Alphabet Inc.: GOOG is currently the largest 13F position at ~8% of the portfolio. The bulk of the position was purchased in 2014 at prices between ~$515 and ~$595. Next year also saw a ~20% stake increase at prices between ~$495 and ~$750. Last five quarters have seen a ~15% trimming. The stock currently trades at ~$1413.

Bank of America and Citigroup Inc.: BAC and C are the second and fourth largest stakes in the portfolio. BAC was a minutely small position in its first 13F filing in 1999. It became a significant part of the portfolio in 2011. The 2012 to 2015 time frame saw the stake built from 9.8M shares to 138M shares at prices between ~$6 and $18. The next three years saw a ~40% reduction at prices between ~$12 and ~$33. Since then, the position has stayed steady although adjustments were made every quarter. The stock is now at $24.78 and it is at 4.54% of the portfolio. The 3.77% C position was built in 2014 at prices between ~$46 and ~$56. The stake was almost doubled over the next three years at prices between ~$37.50 and ~$76. Since then, there has been a combined ~18% selling at prices between ~$50 and ~$80. The stock currently trades at $52.25.

Charter Communications: CHTR is a top three 4.24% of the portfolio stake. It was established in 2015 when around 2M shares were purchased at prices between ~$150 and ~$190. 2017 saw a stake doubling at prices between ~$298 and ~$395. 2018 also saw a ~55% stake increase at prices between ~$260 and ~$390. Last five quarters have seen a ~40% selling at prices between ~$275 and ~$543. The stock currently trades at ~$523.

Regeneron Pharmaceuticals (REGN): REGN is a 3.13% of the portfolio position. The bulk of the stake was built in H1 2018 at prices between $320 and $385. Q2 2019 saw a ~45% increase at prices between $300 and $415. That was followed with minor increases over the last two quarters. This quarter saw a ~50% selling at prices between ~$335 and ~$495. The stock is now at ~$588.

Mastercard Inc. (MA): The 2.64% of the portfolio stake in MA was established in 2011 at prices between $23 and $37. The 2015-2019 time frame has seen the stake reduced from over 25M shares to 4.23M shares at prices between ~$84 and ~$300. The stock currently trades at ~$298. This quarter also saw a ~7% trimming. They are harvesting gains.

Hilton Worldwide (HLT): The 2.54% of the portfolio HLT stake was built during the four quarters through Q1 2019 at prices between $66.50 and $85.75. The stock currently trades at $77.45. Last four quarters have seen only minor adjustments.

Netflix Inc. (NFLX): NFLX is a 2.42% of the portfolio stake purchased in 2017 at prices between ~$131 and ~$200. Next year also saw a ~50% stake increase at prices between ~$210 and ~$410. There was a ~25% selling this quarter at prices between ~$300 and ~$388. The stock is now at ~$418.

Liberty Global (LBTYK): LBTYK is a medium sized 2.41% position established in 2017 at prices between $28 and $37. 2018 also saw a ~15% stake increase at prices between ~$20 and ~$37. Q2 and Q3 2019 had seen a ~30% selling at prices between $24 and $27.50 while last quarter saw a similar increase at prices between $20.50 and $25. It is now at $21.77. There was a ~8% trimming this quarter.

Note: Oakmark has a ~19% ownership stake in Liberty Global.

Ryanair Holdings (RYAAY): RYAAY is a 2.29% of the portfolio stake established in 2018 at prices between ~$69 and ~$125. Q2 2019 also saw a ~20% stake increase at prices between ~$62 and ~$83. The stock currently trades at ~$71. Last two quarters have seen a ~23% selling at prices between $47.50 and $96.

Note: Oakmark has a ~6.5% ownership stake in Ryanair Holdings.

Moody's Corp (MCO): MCO is a 1.63% of the portfolio stake established in 2017 at prices between $94 and $152. The stock currently trades at ~$267. This quarter saw a ~20% reduction at prices between ~$165 and ~$285.

Baidu Inc. (BIDU): BIDU is a 1.10% of the portfolio position first purchased in 2015 at prices between ~$134 and ~$233. Next year saw a substantial stake increase at prices between ~$125 and ~$194. 2017-2018 time frame saw that original stake sold down by ~50% at prices between ~$165 and ~$280. It was built back up last year at prices between ~$97 and ~$182. This quarter saw a ~40% selling at prices between ~$84 and ~$145. The stock currently trades at ~$116.

Ally Financial (ALLY): ALLY is a 1.35% of the portfolio position first purchased in 2015 at prices between $18.50 and $24. Next year saw the position more than doubled at prices between $15.50 and $20.50. Since then, the stake has been kept relatively steady although adjustments were made every quarter. Last five quarters have seen a ~10% selling at prices between ~$11.50 and ~$35. It is now at $20.44.

Apache Corp. (APA), Apple Inc. (AAPL), Automatic Data Processing (ADP), Bank of New York Mellon (BK), Cummins (CMI), CVS Health Group (CVS), Charles Schwab (SCHW), CBRE Group (CBRE), Concho Resources (CXO), Caterpillar Inc. (CAT), Diamondback Energy (FANG), Diageo plc (DEO), Fiat Chrysler (FCAU), General Electric (GE), Gartner Inc. (IT), Goldman Sachs (GS), Halliburton (HAL), Intel Corp (INTC), Interpublic Group (IPG), Liberty Broadband (LBRDK), MGM Resorts (MGM), National Oilwell Varco (NOV), Open Text Corp (OTEX), Oracle Corp (ORCL), Parker-Hannifin (PH), Philip Morris (PM), State Street Corp (STT), Texas Instruments (TXN), TE Connectivity (TEL), and Visa Inc. (V): These very small (less than ~1% of the portfolio each) positions were reduced during the quarter.

Note: Oakmark has significant ownership stakes National Oilwell Varco and Apache Corp.

Kept Steady

None.

Note: Although the stakes as percentage of the 13F portfolio are very small, Oakmark has significant ownership stakes in the following businesses: CoreLogic (CLGX), Tenet Healthcare (THC), Volaris - Controladora Vuela Compañía de Aviación (VLRS), and LivaNova plc (LIVN).

Below is a spreadsheet that shows the changes to William Nygren's Harris Associates 13F portfolio holdings as of Q1 2020:

Analyst’s Disclosure: I am/we are long BAC, BRK.B, GE, GOOGL, LBTYK, PM, TV, WFC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.