2017 Annual Shareholder Letter

By Mark Oelschlager, CFA
Co-Chief Investment Officer & Portfolio Manager
November 30, 2017

Dear Fellow Shareholder:

U.S. economic growth accelerated in 2017, as employment strengthened and the economies of our foreign trade partners improved. Long-awaited progress on wages also materialized, especially at the low end of the wage scale. For years we have heard about increasing inequality and the need to do something to fix it. It remains a complex issue that has not been fully resolved, but it is interesting that, as it so often does, the free market has started to bring things back into balance on its own.

With no economic recession since 2009 and none in sight, stocks continued their ascent. This economic cycle has been slower moving than ones in the past. Some reasons for this include persistently low inflation, conservative behavior by company managements, and responsible lending practices by banks. While these factors have kept a lid on economic growth, they have also prevented a recession and the correction in stocks that usually accompanies it.

Robust corporate profitability continues to confound many, as margins stay high. This has allowed earnings to compound at a nice pace and for companies to return capital to shareholders in the form of dividends and share buybacks. While most focus on the dividend yields of stocks, the growth in the dividends themselves has been an overlooked story of this bull market. Over the last seven years, S&P 500 dividends per share have grown at a compound annual rate of 11.7%. This translates to more than a doubling in nominal dividends over that period.

Stocks are likely also being helped by a more favorable regulatory environment and prospects for tax reform. As we write this, legislators are working towards an agreement that would lower the corporate tax rate, though it may not pass into law until 2018. Through a high tax rate on companies and a policy that, unlike in other countries, taxes profits earned abroad, the U.S. corporate tax system has put American businesses at a competitive disadvantage for years. Changes to both of these issues are on the table.

The change in market leadership has been notable. For most of 2016 the stocks of lowly valued companies (“value”) outperformed, but almost perfectly in sync with the calendar turning to 2017 conditions changed abruptly, as shares of companies that are growing revenue and earnings at a fast pace (“growth”) started to lead the market. The Russell 3000 is a broad market index with companies of all sizes. Through mid-November, the growth portion of this index was up 23.5% in 2017, while the value portion was up only 5.6%; that is a massive gap. At times, it seems like the market is being dominated by a few huge companies, such as Facebook, Apple, Amazon, Netflix, and Alphabet (Google). We do own some of these stocks, but in general our portfolios don’t perform as well on a relative basis when the market is being led by growth. Over the long-term we expect our approach of investing in attractively-priced stocks to help our performance, as growth on average underperforms over the long-run - though in recent years this has not been the case.

Despite the recent outperformance of growth versus value, our long-term relative returns remain strong. Focusing primarily on our three largest Funds: over the last ten years, White Oak has returned 117% cumulatively, versus 106% for the S&P 500 and 112% for the Lipper Large-Cap Growth Funds Average. Pin Oak has returned 153%, versus 108% for the Russell 3000 and 84% for the Lipper Multi-Cap Core Funds Average. Red Oak has returned 217%, versus 149% for the Lipper Science & Technology Funds Average. Of course these include the painful correction of 2008/2009. The numbers for our funds and the market since the correction are significantly better, and we implore our shareholders to understand that future returns are very unlikely to be as good. Market valuations are on the high end of the historic range and company profit margins are high. Both of these have created nice tailwinds for stocks in recent years, but their (we are speaking of valuations and margins) upside appears limited from here. That doesn’t mean stocks are a poor long-term investment - they still offer superior value to bonds and should offer positive returns over the long-term – but we believe it is important to keep expectations in check. We expect stock returns over the next ten years to be well below historical averages.

During the year we completed a successful transition to a new fund administrator, Ultimus Fund Solutions. These folks do all of the back-office work for our mutual funds so that we can focus primarily on the investing part. Our decision to change administrators was done for a variety of reasons and was part of a broader effort to provide high quality service at a reasonable cost to our shareholders. These efforts, along with strong growth in assets during the year, have helped reduce the expense ratios of our Funds, which translates into more money in your pocket.

August marked the 25-year anniversary of the Oak Associates Funds. The funds were launched because we wanted all investors - not just institutions and high-net-worth individuals - to have the opportunity to invest with Oak. Today our seven mutual funds total more than $1 billion, and we sincerely thank you for helping us build this fund family into what it is today. We feel fortunate to be able to manage your money.

Best regards,
Mark Oelschlager, CFA


The statements and opinions expressed are those of the author and do not represent the opinions of Oak Associates or Ultimus Fund Distributors, LLC. All information is historical and not indicative of future results and is subject to change. Reader should not assume that an investment in the securities mentioned was profitable or would be profitable in the future. This information is not a recommendation to buy or sell.

Mutual fund investing involves risk, including possible loss of principal. Small cap investments typically exhibit higher volatility. Emerging markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.

One cannot invest directly in an index.

The performance data quoted represents 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 and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end, please call 1-888-462-5386.

Total Expense Ratios as of most recent prospectus:

  Gross Expense Ratio Net Expense Ratio*
White Oak 1.06% 1.06%
Pin Oak 1.08% 1.08%
Rock Oak 1.65% 1.25%
River Oak 1.51% 1.35%
Red Oak 1.09% 1.09%
Black Oak 1.28% 1.28%
Live Oak 1.11% 1.11%

*Net Expense Ratios reflect applicable fee waivers and expense reimbursements contractual for a period of one year from the Prospectus dated 02/28/2017.


Oak Associates Funds Total Returns
As of 9/30/2017 Annualized: 1-Yr 5-Yr 10-Yr Since Inception
White Oak Select Growth 19.30% 13.99% 8.07% 8.93%
Pin Oak Equity 20.28% 15.16% 9.68% 8.10%
Rock Oak Core Growth 21.13% 12.37% 6.11% 6.68%
River Oak Discovery 11.62% 10.92% 5.55% 7.55%
Red Oak Technology Select 27.70% 20.46% 11.64% 5.28%
Black Oak Emerging Technology 11.78% 13.76% 7.23% -3.50%


The S&P 500 Index is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe, made up of companies selected by economists.

The Russell 3000 Index is a market capitalization-weighted equity index maintained by the FTSE Russell that provides exposure to the entire U.S. stock market. The index tracks the performance of the 3,000 largest U.S.-traded stocks.

To determine if this Fund is an appropriate investment for you, carefully consider the Fund's investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund's prospectus which may be obtained by calling 1-888-462-5386.

Oak Associates Funds are distributed by Ultimus Funds Distributors, LLC. Ultimus Fund Distributors, LLC and Oak Associates Funds are separate and unaffiliated.

CFA is a registered trademark of the CFA Institute.

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