Bill Nygren: A Modern Approach To Value Investing

In this interview, Bill Nygren reflects on his career mistakes and lessons learned. These insights highlight the importance of balancing conviction with caution in investing and the need for value investors to adapt their strategies to include companies with significant intangible assets.

Here are the key takeaways:

• Investing inherently involves risk, and not every decision will be successful. Nygren acknowledged that mistakes are common, especially when defining them as buying stocks that subsequently decline in value.

• Oakmark’s heavy investment in banks before the global financial crisis (GFC) was a significant oversight. The firm underestimated credit risks and wrongly assumed that home prices wouldn’t fall.

• Apple was Nygren’s biggest investment mistake. Despite recognizing its value in 2009, Oakmark initially invested conservatively due to concerns about explaining a growth stock in a value portfolio. This decision cost them significantly, as Apple’s stock price increased thirtyfold over 12 years.

• Position sizing is crucial. Nygren emphasized that a larger initial position in Apple could have compensated for numerous other investment failures.

• Nygren’s experience with Apple led to changes in Oakmark’s approach. They subsequently made substantial investments in other tech giants like Google (Alphabet), demonstrating a willingness to adapt their value investing strategy.