In the third quarter of 2026, Harris Oakmark's Oakmark Select Fund, a non-diversified fund dedicated to capital appreciation through investments in mid- and large-cap U.S. companies, released its investor update. The fund significantly outperformed the S&P 500 Index, achieving an impressive 11.50% return compared to the index's modest 2.30% gain. This performance was largely driven by the information technology and healthcare sectors, which offset challenges faced in consumer staples and real estate.
The Oakmark Select Fund's strategy involves identifying high-quality companies that are undervalued by the market, allowing patient investors to benefit as these companies' market prices align with their intrinsic value. This disciplined approach to investment has proven successful, as evidenced by the fund's recent performance.
One of the standout contributors to the fund's success in the third quarter was Paycom Software, Inc. (NYSE:PAYC), a company specializing in cloud-based human capital management (HCM) solutions tailored for small to mid-sized businesses. As of October 14, 2026, Paycom's stock closed at $239.00, with a market capitalization of $10.58 billion. The company's stock has experienced a remarkable 53.94% increase year-to-date, fluctuating within a 52-week range of $104.90 to $247.781.
The Oakmark Select Fund's investor letter highlighted Paycom's strong performance, attributing the company's stock price surge to several key factors. Paycom reported accelerating revenue growth, significant margin expansion, and profitability that exceeded expectations. These positive outcomes were largely the result of recent cost-reduction initiatives, which have driven substantial growth in both earnings and cash flow. Investors responded favorably to these developments, as well as to Paycom's aggressive share repurchase program and management's confidence in maintaining higher profitability levels, which supports a more positive assessment of the company's long-term earnings potential2.
Despite Paycom's impressive performance, it is not among the 40 most popular stocks held by hedge funds. At the end of the second quarter, 37 hedge fund portfolios included Paycom, which is unchanged from the previous quarter. While Paycom presents a compelling investment opportunity, some market analysts suggest that certain AI stocks may offer greater upside potential with less downside risk. These AI stocks are positioned to benefit from ongoing trends such as tariff policies and the shift towards onshoring, making them attractive alternatives for investors seeking growth opportunities.
Investors interested in gaining further insights into market trends and investment strategies can explore a collection of Q3 2026 investor letters from hedge funds and other leading investors. These letters provide valuable perspectives on the current market environment and highlight potential investment opportunities.
In summary, Paycom Software's recent achievements in revenue growth and profitability have significantly contributed to its stock performance, making it a noteworthy player in the technology sector. However, investors may also want to explore opportunities in AI stocks that present compelling growth prospects. The technology sector continues to evolve rapidly, with companies like Paycom at the forefront of innovation, providing essential solutions for businesses navigating the complexities of human capital management.
Footnotes:
- Paycom Software closed at $239.00 on October 14, 2026, with a market cap of $10.58 billion. Source.
- Paycom's revenue growth and margin expansion drove its stock price increase. Source.
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