Chuck Jaffe: Timing the market is a loser’s game, this winning mutual-fund manager says. Just keep it simple and own stocks — no matter what.


Bill Nygren, legendary manager of the Oakmark Fund, has an answer for investors trying to figure out what to do in today’s chaotic times: Buy stocks.

Specifically, you won’t go wrong buying high-quality, cash-generating businesses at reasonable prices. Buy in good times and bad, regardless of market conditions. But buy.

That’s what he would have told you a year ago as news reports had everyone considering the potential impact of Russia’s invasion of Ukraine. It’s what he would have said three years ago as the world was first learning about COVID-19, or in 2018 after the Standard & Poor’s 500 SPX, +0.53% suffered its first losing year in almost a decade. In fact, that’s exactly what he told me at those times.

Though I didn’t ask him about it March 2000 as he took the helm of Oakmark OAKMX, +0.27% just as the internet bubble was bursting, that would have been his message then too. The fund’s 10% annualized return since then has proven Nygren right.

That’s why his words now — at a time when the market is having a fearful rally, rising despite the looming possibility of a recession — are soothing.

“One of the best long-term bets you can ever make is that if you hold stocks for a long period of time, you’re going to make money,” Nygren said in an interview this week on my podcast, Money Life with Chuck Jaffe. “The market’s up close to 70% of the years going back historically.

“It always amazes me how much time and energy gets spent trying to predict when those 30% of the times are that you’d be better off not being in stocks,” he added. “I make the analogy to a roulette wheel, and say if 24 of the numbers were black and 12 of them were red and they still paid out the same odds, would you really try to guess when it’s going to be red or would you just go up to the table and bet black every time.”

Markets change, but great investors don’t.

While I have chatted with Nygren many times in the past, for the past six years it typically has been one long conversation in the middle of the first quarter. The result is that you get a picture of how markets change, but great investors don’t.  

A year ago, when the U.S. market was tanking, Nygren reminded investors to focus on the long term and not current events. In 2022, at the time of that interview, Oakmark was in the early stages of losing about 13.5% on the year. The fund beat the Standard & Poor’s 500 — which lost more than 18 percent — but landed in the bottom 10% of Morningstar’s large-cap value category.

This year, the fund is up about 10%, more than double the S&P, and ranks atop its Morningstar peer group.

Through it all, Nygren’s demeanor, attitude and approach are unchanged, but that’s also what he suggests for individual investors. 

“Rationality wins out in the long run, It always does,” he said in a separate conversation from the show. “This is the one thing we know how to do and we’re not going to abandon it here. That would be the absolute worst thing anyone could do, yet it happens all the time where money managers and individuals second guess themselves — because of what’s happening in the market right now — right into trouble.”  

At a time when the U.S. market is flashing conflicting signals — positive technical suggesting short-term potential with souring fundamentals hinting at longer-term troubles — Nygren worries that investors are making this too complicated, and forgetting about what works when nurtured by patience and perspective.

“There are a lot of stocks today that are available at single-digit [price/earnings] multiples,” Nygren said on the show. “High-quality banks, high quality energy companies, most anything related to the auto space. You can buy those businesses — good cash-generating businesses — at single-digit P/Es, and we think investors who do that and put those investments away and check back in five years from now, they’ll be pretty happy that they invested in a time that seemed as chaotic as this past year seemed.”

Nygren isn’t being a Pollyanna, nor is he ignoring the problems affecting the market, although he does believe the market might be able to ride out the current issues without a recession. The difference in his buy-now message is that pricing remains a key factor.

He said the market is coming to the end of a period where investors could say, “’Just buy good businesses, you don’t have to worry about what you pay for them.’ That’s never worked historically, yet for the past 10 years people have gotten rich thinking that way.  We think that has to reverse.”  

To find attractive stocks in this climate, Nygren noted that traditional measures like p/e and price-to-book ratios “aren’t capturing a lot of the real sources of business value today.” He says that accountants don’t want to give companies credit for intangible assets such as goodwill, brand names, how value is created, the information economy and more, and he thinks that the traditional indicators will do a poor job of showing real value until accountants recognize what they are overlooking now.

The result, he notes, is that the market will discount good companies while it rides out troubles, and reward those with vision later. “The market has a way of tricking you into considering changing your philosophy just at those times when it would be most expensive to do so,” Nygren said. “Don’t be fooled, this is one of those times.”

More: ‘We’re all bracing for impact.’ Most Americans think a recession is already here.

Also read: 6 cheap stocks that famed value-fund manager Bill Nygren says can help you beat the market

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