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Published on: 8/29/2001
Last Visited: 8/29/2001
Robert Sanborn, one of the most high-profile practitioners of value investing, is stepping down from the $2.7 billion Oakmark fund, which he's managed since its 1991 inception.
He was replaced Tuesday by Bill Nygren, manager of the $1.6 billion Oakmark Select fund, and Kevin Grant, a senior analyst who's worked with Sanborn.
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Sanborn will remain with Harris Associates, the Oakmark Funds adviser, where he'll manage private accounts.All Oakmark managers work from the same "approved" list of 80 to 120 stocks set by the firm's investment staff.Nygren has outperformed Sanborn over the past few years.
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A deep value investor, Sanborn has adhered strictly to a style that has lagged the market for several years.Value funds tend to focus on stocks that are cheaper in comparison either to their peers or to valuation measures such as price-to-earnings ratios.Deep value managers are more extreme, typically buying shares of what they think are profoundly underappreciated companies at cheap prices, on the assumption the market eventually will recognize their value.
In years that were kinder to value investing, Sanborn routinely beat the S&P 500 and his peers.For example, in 1993, Sanborn posted a 30.5% gain, beating the S&P 500 by more than 20 percentage points and 98% of his peers, according to Morningstar.As recently as 1997, he earned a 32.6% return, barely trailing the S&P 500 and beating 88% of his peers.
But the past few years have heavily favored growth stocks.Large-cap growth funds have posted a 30% average annual return over the past five years, compared with just more than 19% annually for their value peers, according to Lipper.Over the past year, growth is outperforming value 37% to 0.5%.
Sanborn's strict approach has put him at the bottom of the value category's scrap heap.Despite tech stocks' sharp run-up, he stuck to his guns and avoided them and other pricey sectors.
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A company spokeswoman says the move wasn't driven by the Oakmark's sagging performance, but that Sanborn had tired of the "spotlight."That spotlight had probably grown quite hot as the fund continued to sag.
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