The S&P isn't the broad-based index it used to be, says Oakmark Fund's Bill Nygren

Key Concepts

• 9/11 remembrance and its impact on the speaker.
• Oakmark's investment strategy: value investing, focusing on companies with low price-to-earnings ratios.
• S&P 500 concentration in technology stocks and its implications for investors.
• Importance of long-term equity investing for meeting financial goals.
• Warren Buffett-style investment approach: long-term perspective, avoiding market timing.

9/11 Remembrance and Initial Reaction

• The speaker recalls being in Chicago on September 11, 2001, for his son's birthday.
• He was on set for a TV interview with Mark Haines when the first plane hit the World Trade Center.
• The speaker remembers his firm, Harris Oakmark, having direct lines to Cantor Fitzgerald, where employees were saying goodbyes.

Oakmark's Investment Strategy and Market Perspective

• Oakmark had a strong track record in 2001 because it avoided the technology boom.
• The firm focuses on value investing, targeting companies with low price-to-earnings (P/E) ratios.
• The speaker argues that the S&P 500 is no longer a broad-based index but is heavily concentrated in technology stocks.
• Nine of the ten largest companies in the S&P 500 are technology names, representing 40% of the market.
• While the S&P 500's multiple has increased from the upper teens to the mid-20s in the past seven years, there are still about 150 stocks trading under 14 times earnings.
• Oakmark's portfolio is significantly different from the S&P 500, providing a counterbalance to investors with heavy technology exposure.

S&P 500 Concentration and Investor Implications

• The speaker emphasizes that the S&P 500's concentration in technology stocks means it may not accurately represent the broader market.
• He suggests that investors should focus on growing their capital to meet financial goals, rather than solely tracking the S&P 500.
• David Rubenstein's earlier comments about the S&P 500's 18-fold return over 30 years are mentioned, but the speaker highlights that individual investors' real assets grew about eightfold during that period.

Long-Term Equity Investing and Warren Buffett's Approach

• The speaker asserts that equities are the best option for long-term investing, especially with a 30-year horizon.
• He notes that Squawk Box often focuses on market timing, which Oakmark avoids.
• Oakmark follows a Warren Buffett-style approach, emphasizing a long-term perspective and avoiding attempts to time the market.

Conclusion

The speaker advocates for a value-oriented, long-term investment approach, particularly in light of the S&P 500's increasing concentration in technology stocks. He suggests that investors should focus on meeting their financial goals through diversified equity investments rather than solely tracking the performance of a potentially skewed index. The firm's strategy is rooted in the principles of value investing and a long-term perspective, similar to Warren Buffett's approach.