Bill Nygren

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Bill Nygren

Bill Nygren joined Harris Associates in 1983. After a stint as director of research for Harris Associates for most of the 1990s, Nygren took on a role as fund manager in early 2000, near the height of the technology bubble. Value investing is always tough, but even tougher when a bubble exists in stock prices. During these times, the undervalued stocks usually stay cheap for a long time, while the expensive "hot stocks" of the moment keep going up. When Nygren took over, investors were jumping ship trying to take advantage of ever-increasing Internet and other technology stocks. Nygren stuck to his guns, however, buying growing but undervalued firms.

His methods

Nygren seeks stocks that are trading at discounts to their estimated private market values. To estimate a company’s intrinsic value, Nygren and his colleagues use discounted cash-flow analysis and look at comparable transactions, among many other factors. When picking stocks, Nygren likes to look for companies he believes the market underappreciates, perhaps because of a short-term difficulty. In a speech given in early 2005, Nygren described his investing philosophy using a variation of the 80/20 rule, a strategy made famous by his former portfolio holding, Illinois Tool Works (ITW). Nygren said he looks for stocks where 80% of the commentary about a company revolves around a piece of business that contributes only about 20% of the profits. When he finds a situation like this, it is likely the market is undervaluing the firm.