According to an InvestmentNews article, Oakmark Funds, managed by the value investment firm Harris Associates, are increasingly holding technology stocks traditionally preferred by growth strategies:

The Oakmark Select [OAKLX] Fund has a 24% weighting to technology, and the flagship $11 billion Oakmark Fund (OAKMX) has a 19% weighting.

The reason is that prices of traditional value equities have increased to the point where the technology sector is more attractive. To illustrate that, here are some statistics from a recent edition of S&P’s The Outlook:

S&P 500 GICS Sector Performance

At 12.9, the price to estimated 2014 earnings ratio of the information technology sector is lower than that of classic value sectors, such as consumer staples (15.9) or utilities (14.7). In addition, the 13.1% year-to-date return of the sector trails that of the overall S&P 500® (19.1%). Finally, the price-to-earnings-growth (PEG) ratio of 1.0 for the sector matches that of consumer discretionary for the lowest value of all sectors. In a low-interest-rate environment maintained by the Fed, investors in search of dividend income have pushed the PEG of the consumer staples sector to 1.7 and telecom services to 1.6.

While the emphasis on technology stocks may improve the funds’ performance, as shown in a previous Alpholio™ post, past selection of securities in OAKMX did not lead to spectacular results when measured on a truly risk-adjusted basis. Therefore, investors should view the latest attempts with caution.

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