U.S. equities mid-year update
August 04, 2026
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4 min
I think for those of you that are familiar with how Harris Oakmark invests, you know that we tend to think our crystal ball gets cloudy earlier than growth investors think their crystal ball gets cloudy. We don't want to pay something today for an opinion we have of what the world might look like a decade from now, because we don't think we-- or, for that matter, most people-- are very good at estimating how the world is going to change that far out.
And with the excitement about AI today, I would say most of the AI-related stocks, you have to have an opinion about what the world looks like a decade from now. And much like a bond that's a long-term bond is a riskier bond because your cash flows are farther out into the future, we think the same is true in equities, that a company that's at five times earnings that's returning 20% of its cash every year-- you'll get most of your capital back in a five-year period-- is just, by its nature, much less risky than a business that most of the value is going to come from more than a decade from now.
So when we see that, we up the risk category in our required return. And I think that's something the market generally is not doing today, and that creates this skew where the market might think something like SpaceX is undervalued, and we look at it, and we don't see enough in the near-term future to get comfortable with how it's being valued.
