Covid-19 sent shockwaves through the market in the first quarter. While the correction was painful, we expect that strong companies will emerge from the slowdown stronger, and we have been buying industry leading firms at what we believe are exceptional prices.
April 20, 2020
During the first quarter of 2020, the Osterweis Fund (the Fund) generated a total return of -16.16% outperforming the -19.60% return for the S&P 500 Index (the S&P 500). The Fund’s annualized total returns over the one-year, five-year, ten-year and twenty-year periods ending March 31, 2020 were -2.88%, 2.21%, 6.83% and 5.45%, respectively, compared to -6.98%, 6.73%, 10.53% and 4.79% for the S&P 500 over the same periods.
Performance data quoted represent past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by calling (866) 236-0050. An investment should not be made solely on returns. The Fund’s gross expense ratio was 1.18% and net expense ratio was 0.96% as of March 31, 2019. The Adviser has contractually agreed to waive certain fees through June 30, 2020.
The coronavirus not only wreaked havoc on the markets during the first quarter, it has temporarily shut down large segments of the economy, transformed how we live, and most importantly, infected nearly 2 million people around the world. Social distancing, hand washing, and (increasingly) face masks have become the new normal. To limit the economic damage, the U.S. government has approved an unprecedented $2 trillion relief package and the Federal Reserve has deployed every tool in its toolbox. The measures appear to be working, as the markets have begun to stabilize (though it is still too early to know whether we have reached a bottom), and both businesses and consumers are starting to receive the help they need.
In our latest Outlook, we take a closer look at the impact Covid-19 has had on the markets, and we also discuss how the simultaneous collapse of crude oil prices has created additional stress in the economy. While we appreciate that the near term is fraught with uncertainty, we believe economic activity will recover at some point and we view the current correction as an excellent buying opportunity. As we explain in the outlook, we expect that strong companies will come out of this stronger, and weak ones will be even weaker. With that as our operating principle, we have been selectively purchasing shares in companies that we feel are well positioned to succeed in the long run, all of which have been selling at a substantial discount to their pre-Covid prices.
We thank you for your continued confidence in our management.
John Osterweis & Team
This commentary contains the current opinions of the author as of the date above, which are subject to change at any time. This commentary has been distributed for informational purposes only and is not a recommendation or offer of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.
The S&P 500 Index is an unmanaged index that is widely regarded as the standard for measuring large-cap U.S. stock market performance. The index does not incur expenses, is not available for investment, and includes the reinvestment of dividends.
Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.
Earnings growth is not representative of the fund’s future performance.
The Osterweis Funds are available by prospectus only. The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the Funds. You may obtain a summary or statutory prospectus by calling toll free at (866) 236-0050, or by visiting www.osterweis.com/statpro. Please read the prospectus carefully before investing to ensure the Fund is appropriate for your goals and risk tolerance.
Mutual fund investing involves risk. Principal loss is possible.
The Osterweis Fund may invest in medium and smaller sized companies, which involve additional risks such as limited liquidity and greater volatility. The Fund may invest in foreign and emerging market securities, which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. The Fund may invest in Master Limited Partnerships, which involve risk related to energy prices, demand and changes in tax code. The Fund may invest in debt securities that are un-rated or rated below investment grade. Lower-rated securities may present an increased possibility of default, price volatility or illiquidity compared to higher-rated securities. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.
While the fund is no-load, management fees and other expenses still apply. Please refer to the prospectus for more information.
Osterweis Capital Management is the adviser to the Osterweis Funds, which are distributed by Quasar Distributors, LLC.