This document summarizes the second-quarter 2025 performance of the Oakmark Select Fund. Despite a short-term underperformance compared to the S&P 500 Index during the quarter, the fund has maintained a strong track record of outperforming its benchmark since its inception. The fund’s recent strategic moves underscore a proactive approach to leveraging market volatility for long-term gains. By reallocating investments towards undervalued assets and adjusting holdings in response to market shifts, the fund aims to enhance risk-adjusted returns for its investors. Key sectors contributing positively included financials and consumer discretionary, while healthcare and energy sectors faced headwinds. The report also sheds light on significant additions and removals from the portfolio, reflecting the fund's dynamic investment strategy and its commitment to identifying opportunities amidst changing market conditions.
Detailed Report on Oakmark Select Fund's Second Quarter 2025 Activities
In the second quarter of 2025, the Oakmark Select Fund (Investor Share Class), managed by Harris Oakmark, demonstrated a mixed performance. While it registered a short-term underperformance against the robust S&P 500 Index during this period, its long-standing performance since inception showed a commendable lead over the benchmark.
A deep dive into sector-specific contributions reveals that the financial and consumer discretionary sectors were the primary engines of growth for the fund. Conversely, the healthcare and energy sectors presented the most significant drag on performance, impacting overall returns. William C. Nygren, CFA, CIO-U.S. at Harris Oakmark, emphasized the fund's deliberate strategy to navigate heightened market volatility. The fund actively repositioned its portfolio, focusing on assets offering the most compelling risk-adjusted return profiles, as detailed in his commentary titled “Our Bottom-Up Approach to a Top-Down Crisis.”
Among the top-performing individual holdings, Alphabet Class A shares stood out. This U.S.-based technology titan experienced a steady appreciation in its stock price, fueled by strong first-quarter 2025 earnings that surpassed expectations, particularly in Google Search revenue. The company's effective margin improvements, even amid substantial investments in artificial intelligence, highlighted its operational efficiency. Oakmark Select Fund managers believe the long-term benefits of these AI investments across Alphabet's diverse business units remain largely underestimated by the broader market, presenting an attractive valuation opportunity.
On the flip side, IQVIA Holdings, a U.S.-headquartered biopharma services provider, was the quarter's largest detractor. Its stock price declined amidst prevailing market uncertainties, including concerns over potential drug price controls, pharmaceutical tariffs, and government budget cuts. Despite these pressures, and a slowdown in biopharma research and development spending, IQVIA's Contract Research Organization segment outperformed its peers, and its Technology and Analytic Solutions segment showed strong performance. Despite near-term challenges, the fund remains optimistic about IQVIA’s intermediate and long-term prospects, especially with the stock trading near historical low multiples and increased share repurchases signaling management's confidence.
The quarter also saw active portfolio adjustments. Sensing opportunities arising from tariff-related market fears, the fund strategically reduced its exposure to resilient holdings like Keurig Dr Pepper and Paycom Software. The capital was then reallocated to companies where market prices had disproportionately fallen below their intrinsic value, such as First Citizens Bank and Airbnb. This agile portfolio management approach aims to enhance the margin of safety and boost potential returns for clients.
New significant investments were made in Charles River Labs, a global leader in preclinical research and drug development services. Despite current cyclical headwinds and market sentiment dampened by concerns over research model alternatives, the fund views its strong competitive moat, consistent high returns on capital, and robust organic growth potential favorably. Similarly, ICON PLC, the second-largest contract research organization, was added to the portfolio. Despite industry-wide challenges affecting biopharma R&D spending, the fund anticipates a recovery and continued outsourcing trends, which will drive earnings growth for top CROs like ICON. Finally, Salesforce, a leading technology firm, was re-entered into the portfolio. Following a 30% stock price decline since the fund’s previous exit in December, coupled with sustained strong fundamental results, the fund identified an opportune moment to reinvest. The initial position was established through a put writing strategy, aiming to optimize the entry price based on a perceived overvaluation of volatility in the options market.
Reflecting on Investment Strategy and Market Agility
This quarter's activities at the Oakmark Select Fund offer a compelling narrative on the importance of an active, value-oriented investment strategy in a dynamic market. From a journalist's perspective, the fund's readiness to "take advantage of heightened market volatility" is particularly insightful. It underscores a philosophy that views downturns or uncertainties not as mere obstacles, but as fertile ground for strategic repositioning and long-term value creation. The detailed rationale behind each investment and divestment, such as the continued belief in Alphabet's AI payoff despite incremental competition or the long-term confidence in IQVIA despite near-term sector pressures, highlights a rigorous, research-driven approach.
Moreover, the fund's opportunistic rebalancing, selling shares in companies that had 'held up relatively well' to invest in those with 'declined far more than our view of intrinsic value,' serves as a practical lesson in contrarian investing. It's a reminder that true value often lies where others fear to tread. This proactive stance, combining deep fundamental analysis with an agile response to market shifts, could inspire both seasoned investors and novices. It suggests that success in investing is less about predicting the future with certainty and more about adapting intelligently and seizing opportunities when market irrationality presents itself. The emphasis on identifying and capitalizing on mispriced assets, even through complex strategies like put writing for Salesforce, exemplifies a sophisticated yet grounded approach to wealth management.
Morgan Stanley has recently adjusted its financial outlook for T-Mobile US, elevating the stock's price target and maintaining a favorable investment rating. This strategic move by the prominent financial institution underscores a positive assessment of the telecommunications giant's future prospects. The revision comes at a time when the broader economic landscape is shifting, with new legislative frameworks influencing corporate financial strategies. The analyst's commentary highlights the potential for substantial free cash flow generation, hinting at various avenues for capital deployment that could further enhance shareholder value. This development suggests a robust confidence in T-Mobile's operational resilience and its capacity to navigate an evolving market.
Despite the prevailing competitive pressures within the telecommunications sector, Morgan Stanley's analysis indicates that the intensity of this competition is not necessarily escalating. This nuanced view provides a reassuring perspective for investors, suggesting that T-Mobile is well-positioned to sustain its market standing. The company's core business, encompassing wireless communication services across its various brands, continues to form a solid foundation for its growth trajectory. While the report acknowledges alternative investment opportunities, particularly within the burgeoning AI sector, it firmly reiterates T-Mobile's appeal as a long-term, low-volatility asset.
Revised Financial Forecast for T-Mobile
Morgan Stanley has upgraded its price target for T-Mobile US (TMUS) to $280, a significant increase from its previous target of $265, while upholding an 'Overweight' recommendation on the stock. This adjustment reflects the firm's optimistic view on the company's financial trajectory, largely influenced by recent legislative changes. The newly introduced tax law is expected to provide a considerable boost to the free cash flow of U.S. telecommunications providers, a benefit that T-Mobile is poised to capitalize on. This enhanced financial flexibility is anticipated to enable strategic investments across several key areas.
According to Morgan Stanley's research insights conveyed to investors, the increased free cash flow for domestic operators, stemming from the recent tax legislation, is likely to be strategically allocated. This allocation could involve a combination of substantial investments in fiber network infrastructure, aggressive share repurchase programs, and potential merger and acquisition activities. These avenues for capital deployment are designed to strengthen T-Mobile's market position, expand its service offerings, and ultimately enhance shareholder returns. Despite the inherent competitiveness characterizing the telecommunications industry, Morgan Stanley's analysis suggests that the competitive landscape, while present, is not necessarily intensifying, thereby offering a degree of stability for T-Mobile's operations.
Strategic Capital Allocation and Market Position
T-Mobile US, a prominent provider of wireless communication services under both its namesake and MetroPCS brands, offers a comprehensive suite of prepaid, postpaid wireless messaging, voice, and data services, alongside wholesale wireless solutions. The company's robust operational framework and diverse service portfolio underpin its stability in a dynamic market. The strategic allocation of capital, as suggested by Morgan Stanley, is critical for maintaining T-Mobile's competitive edge and fostering long-term growth. Investments in fiber builds are particularly pertinent, as they directly enhance network capacity and service quality, which are crucial differentiators in the highly competitive wireless sector.
The emphasis on share buybacks and potential mergers and acquisitions further underscores a proactive approach to capital management. Share repurchases can enhance shareholder value by reducing the number of outstanding shares and boosting earnings per share, while strategic M&A activities can expand market reach, integrate new technologies, and diversify revenue streams. Such measures are indicative of a company focused on maximizing its financial efficiency and market footprint. While investment alternatives, especially in high-growth areas like artificial intelligence, are acknowledged, T-Mobile's classification as a long-term, low-volatility stock signifies its foundational strength and consistent performance in the telecommunications landscape.
In a recent analysis, Wells Fargo reiterated its optimistic stance on The Progressive Corporation (PGR), underscoring the insurer's significant growth trajectory and impressive financial health. The firm's assessment highlights PGR's capacity for expanding its market presence and sustaining solid profitability, even in a dynamic market environment.
\nFinancial Insights: Progressive's Promising Outlook
\nOn a significant day, July 14, financial powerhouse Wells Fargo delivered a compelling endorsement of The Progressive Corporation (NYSE: PGR). Esteemed analyst Elyse Greenspan, a prominent voice in the investment community, emphatically reaffirmed a 'Buy' rating for the insurance giant, concurrently maintaining a robust price target of $333 per share. This declaration signals a continued belief in the company's strong performance and future potential.
\nGreenspan's analysis painted a vibrant picture of Progressive's operational excellence. She meticulously detailed the company's better-than-expected growth in policies in force (PIF), a critical metric reflecting expanding customer reach and market penetration. Furthermore, her report emphasized Progressive's sustained robust margins, indicative of efficient operations and effective risk management within its diverse portfolio.
\nThese encouraging indicators, according to Greenspan, are bolstered by favorable reserve developments, suggesting a healthy financial foundation and prudent capital allocation. The confluence of these factors, she argued, positions Progressive favorably to persistently capture a larger share of the competitive insurance market. Despite some recent periods of share price underperformance, Greenspan underscored that Progressive's current valuation remains highly attractive, trading at a sensible multiple relative to its projected 2026 earnings per share. This makes the company a noteworthy contender for discerning investors.
\nThe Progressive Corporation, an eminent insurance holding company, extends a comprehensive suite of services. Its operations span crucial segments, encompassing residential property insurance, personal and commercial auto insurance, alongside an array of other specialized property-casualty insurance offerings and ancillary services. The company strategically manages its vast business through distinct Personal Lines, Commercial Lines, and Property segments, each contributing to its overarching market strength and financial resilience.
\nA hypothetical image of a team of diligent accountants, deeply engrossed in a boardroom discussion, symbolizes the strategic deliberations that underpin the successful trajectory of an insurance company of Progressive's stature. This visual metaphor captures the essence of rigorous financial planning and analytical foresight that drives sustained corporate growth.
\nWhile the investment potential of PGR is evident and acknowledged, it is also worth noting that the market presents other opportunities. Specifically, certain AI-driven equities may offer even greater upside and potentially reduced downside risk. For investors seeking highly undervalued AI stocks poised to benefit significantly from evolving economic landscapes, including potential impacts from trade policies and re-shoring trends, further specialized analysis is available.
\nThe financial world constantly evolves, presenting new opportunities and challenges. While The Progressive Corporation demonstrates admirable stability and growth within the insurance sector, the broader market, particularly in burgeoning technological domains like artificial intelligence, offers different avenues for capital appreciation. Investors are continually seeking that delicate balance between stability and high-growth potential, adapting their strategies to prevailing economic winds and emerging industry trends. This ongoing pursuit of optimal investment vehicles underscores the dynamic nature of global finance.