The Oakmark Fund, particularly its Investor Class, achieved strong performance in the fourth quarter of 2025 and demonstrated consistent outperformance against the S&P 500 Index since its establishment. This success was significantly driven by strategic investments in communication services and healthcare sectors, while the energy sector posed a challenge. The fund's managers maintain their commitment to a value-oriented investment philosophy, actively seeking out companies that are currently undervalued across various industries, including those that have not participated in recent market upswings.
A notable contributor to the fund's success during the quarter was Warner Bros Discovery (WBD). The media conglomerate experienced a substantial increase in its stock value following numerous acquisition bids for its various business units. Ultimately, WBD announced a deal to divest its Streaming and Studios division to Netflix, with its Global Networks business being spun off to shareholders. This move, coupled with a direct offer from Paramount Skydance for the entire company, underscored the ongoing efforts to enhance shareholder value, which the fund managers closely monitor. Such developments highlight the dynamic nature of market opportunities that the Oakmark Fund seeks to capitalize on through its diligent research and investment processes.
Conversely, Fiserv (FISV), a prominent banking software and payment processing firm, was the primary detractor during the same period. Its stock price declined sharply after a disappointing third-quarter earnings report, revealing that previous growth and margin forecasts were overly optimistic. Despite this setback, the fund managers remain confident in Fiserv's long-term potential, citing its strong competitive position and attractive assets within expanding markets. Recent changes in leadership and increased insider stock purchases further bolster this confidence, with expectations for mid-single-digit organic revenue growth and double-digit EPS growth. The perceived undervaluation of Fiserv's shares, trading at a single-digit multiple of current earnings, presents an attractive risk/reward profile for the fund.
During the quarter, the Oakmark Fund expanded its portfolio with new investments in AerCap Holdings, Amrize, and CDW. AerCap, the world's largest aircraft lessor, was acquired at a modest premium to its book value and a single-digit price-to-earnings multiple. The fund views this as compelling given AerCap's robust return on equity and sustainable competitive advantages, believing its book value is currently underestimated. Amrize, a leading producer of building materials and construction solutions, was added due to its strong market positions, pricing power, and long-term growth potential, particularly in its Building Envelope segment. CDW, an information technology solutions company, was purchased at an attractive valuation, as the challenging environment for IT service and hardware resellers created a buying opportunity for a company with a strong corporate culture and expanding software and service businesses.
The fund also divested its positions in Bank of New York Mellon and Magna, reflecting its active management approach to optimize the portfolio. The portfolio managers, William C. Nygren, Michael A. Nicolas, and Robert F. Bierig, emphasize intensive, fundamental research and a disciplined screening process to identify companies trading below their intrinsic value. Their investment philosophy centers on owning a portion of a business for the long term, driven by significant profit potential and strong, owner-minded management teams. This rigorous approach aims to deliver sustained value for investors by focusing on the underlying fundamentals of each company.
The Oakmark Fund's strategic decisions for the fourth quarter of 2025 underscore its commitment to value investing, demonstrated through targeted acquisitions in promising sectors and the strategic management of existing holdings. The fund's ability to identify and invest in companies like AerCap, Amrize, and CDW, even amidst varied market conditions, illustrates a consistent dedication to uncovering undervalued assets that are expected to generate long-term returns. This proactive and research-driven investment strategy aims to continually position the fund for favorable performance.