Tags: stock | returns

Nygren: Long-Term Returns Will Beat Historic Average

Monday, 10 Aug 2009 10:09 AM

By Julie Crawshaw

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Oakmark Fund manager Bill Nygren says long-term returns on stocks will beat the historic average.

“In our view, the biggest question concerning earnings is when they will recover, not if,” Nygren writes in a note to investors.

“Starting from a ‘normal’ P/E level, we believe the market should increase from here more or less as much as earnings recover, which would lead to above-average returns.”

The recent stock market rally resulted in a small reduction in assets in money market funds and a larger increase in the value of the S&P 500, Nygren notes, adding that he thinks there is “still plenty of fire power waiting to invest in stocks.”

Nygren, considered a value investor, recently purchased shares in 3M Company, Covidien, formerly a part of Tyco Healthcare, Oracle Corp., and Precision Castparts, which produces metal components primarily for the space industry.

Of the 132 mutual funds on the market that employ hedging strategies, nearly half have been launched in the past three years, The Wall Street Journal reports, which could lead to more hedge-like mutual funds being launched.

“These are strategies that should have been offered to retail investors a long time ago,” Morningstar’s Nadia Papagiannis says.

“However, investors should be warned that investment strategies in these funds vary widely, they assume additional risk, fees are higher than a regular mutual fund, and few have proven track records,” she advised.

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