OAKMARK FUNDS'
BILL NYGREN & HENRY BERGHOEF

(continued from preceding page)

Today, six of our 50-55 names are in the healthcare area.

Nygren: In addition to Guidant, we own Merck, Bristol-Myers, Schering-Plough and Abbott Labs. Am I missing anything in healthcare?

Berghoef: Chiron.

Nygren: Chiron - that's a biotechnology company. So six of the 50-55 names that we own are in the healthcare area.

Attendee: And those are fairly recent buys?

Nygren: We've owned Chiron for a couple of years. They had some company specific issues that we think they've overcome with new management. Of the other names, Guidant was the first we started buying - because 18 months ago, its stock went through a disappointment and the price fell way down. So that's when we got into it. The other names we went into pretty much over the course of the last year - kind of one a quarter has gotten down to the price level that we wanted to buy it at.

Pfizer just never got cheap enough for us.

Loomis: Why haven't you bought Pfizer?

Berghoef: It's really been more of a price issue on that one. We've been interested in owning it, but haven't been willing to pay the price.

Nygren: While Pfizer's a great company, we haven't believed that it deserved as much of a multiple premium as it now has over the others we own.

And healthcare service companies tend to live on the edge.

Loomis: And Tenet?… [After a long pause, Nygren and Berghoef look at each other and crack up]. I heard [Legg Mason's] Bill Miller say yesterday that he was buying Tenet. That's why I ask.

Nygren: I saw that. And I've got a lot of respect for Bill. It's just that I've tended to have a bias against the healthcare service companies - because being successful in that business has tended to mean living on the edge of the regulations. And I think that it's hard as an outsider to make an effective judgement of how close to the edges the various companies are playing.

Plus, you can go from prosperity to famine in a hurry.

Berghoef: They're also very dependent on lots of arcane and complicated Medicare and other governmental reimbursement rules. And those things can change in ways that you can't always anticipate.

Nygren: And they change after the fact.

Berghoef: That's right. And [in terms of] margins, you can go from prosperity to famine in a hurry in that industry. And I personally don't have a great deal of confidence in my ability to forecast exactly how all of that's going to play out.

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