Oakmark Select Q3: Paycom Surges, Meta Added, Ally Lags

Oakmark Select Fund’s third-quarter commentary pointed to Paycom Software as the top contributor and revealed a new stake in Meta Platforms, while Ally Financial weighed on returns as consumer credit recovery lagged expectations.

Paycom shares rose sharply after the payroll and workforce management company reported accelerating revenue growth, significant margin expansion, and stronger-than-expected profitability, the fund said. The results reflected cost-reduction initiatives that drove earnings and cash flow higher. Management’s indication that higher profitability levels can be sustained supported a higher assessment of long-term earnings power, according to the commentary.

Ally Financial declined despite reporting largely in-line results and continued improvements in lending margins and credit performance. Investors remained cautious on the pace of consumer credit recovery and the broader economic outlook, the fund noted. Oakmark said positive developments in Ally’s business mix and management team position the company well over the medium term.

Meta Platforms, whose Family of Apps reaches 3.6 billion daily active users, was a new addition. The fund acknowledged investor concerns over Meta’s large AI investment but said it is confident the company can monetize AI compute through core business improvement, new AI businesses, and potentially third-party compute rental. The Family of Apps is already benefiting from improved recommendation and ad-matching systems, and Meta’s new personal AI assistant, Muse, is off to a strong start, the fund wrote. Shares traded near their lowest multiple outside the 2022 period, and Oakmark said it invested at a meaningful discount to its estimate of intrinsic value.

Rocket Companies, the mortgage originator and servicer, remains a holding. The fund said the company has consistently gained market share through its scale and low-cost operating model and still has a long runway for growth in a fragmented industry. The market is underappreciating Rocket’s earnings power in a normalized mortgage environment, particularly when industry volumes recover, according to the commentary.

As of Sept. 30, the fund’s top holdings included Salesforce at 7.4% of net assets, IQVIA Holdings at 6.2%, and Paycom Software at 4.4%.