Oakmark Manager: Volatility Is Our Friend

Unusual behavior of the stock market should benefit Oakmark Equity & Income shareholders, the fund's manager wrote in his yearend letter to shareholders.

In 2011, stocks in the S&P 500 experienced 69 "one-way days," those in which 90 percent of the stocks in the index moved up or down in lockstep. Such one-way days traditionally have been very rare because of the broad diversification of companies that make up the index. So this is a significant development, portfolio manager Clyde McGregor wrote.

"As we have written many times, we believe short-term volatility is the friend of value investors because it creates opportunities for greater-than-normal mispricing," he wrote. "When stocks are trading as a class rather than on their individual merits, our insights should afford us the possibility for superior outcomes."

To read the letter, click here.

For the year, Oakmark Equity & Income produced a 1 percent return, in line with the Lipper Balanced Fund Index. For the fourth quarter, Equity & Income was up 9 percent, two points ahead of the index. Since inception in 1995, the fund has returned 11 percent annually vs. the index return of 6 percent.

The fund is a component of the Bradway Strategic Portfolio, which consists primarily of investments with top money managers.