Nygren: More Gains to Come

Top-performing fund manager Bill Nygren of Oakmark says he sees a number of reasons why stock returns this decade will “far surpass” those of the previous decade.

“We think there are more profits to come,” Nygren writes in a letter to shareholders, noting that all three of Oakmark’s domestic funds are now at all-time highs. He offers several reasons that stocks are poised for continued gains:

  • The P/E ratios of most stocks are still below historical averages.
  • The dividend yields of many stocks are significantly higher than bond yields.
  • The balance sheets of many companies are low in debt and high in cash.
  • Low dividend payout ratios for many companies give them good prospects for dividend increases while still providing them excess capital for incremental growth through share repurchases or acquisitions.

“For those reasons,” Nygren says, “we continue to believe that the performance of equities in the decade to come will far surpass the decade that is in the rear-view mirror.”

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