Donald Yacktman’s portfolio is out. For those who follow the Morningstar Manager of the Decade finalist, Yacktman also timed the release with an eight minutes long interview with Bloomberg. During the interview, he talked about how the changes in Washington could affect the taxes and economy. He sees the lamb duck congress will do nothing to the tax expiration which will effectively raise the tax. The long term effect of higher tax will be slower growth.
As a bottom-up investor, he mostly talked about his portfolio movements. During the past quarter, while he stayed with high quality stocks, he also took advantage of the plunge in price of stocks that were out of favor sometimes during the past quarter. In particular, he defended his decision of buying education providers such as Apollo Group (APOL, Financial) and Health Care stocks such as Stryker (SYK, Financial). Both sectors have undergone some kind of government intervention and Yacktman sees opportunities in them:
(Source: Bloomberg)
Here are the top Yacktman purchases and his holding history. We also incorporate comments he made in his latest quarterly commentary on a few individual stocks:
No. 1: News Corp. (NWSA, Financial), Add: 2.18% of the portfolio - Total: 36,683,277 Shares
NEWS CORPORATION is a diversified entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers and information services; book publishing; and other. News Corp. has a market cap of $26.78 billion; its shares were traded at around $14.51 with a P/E ratio of 15.1 and P/S ratio of 0.8. The dividend yield of News Corp. stocks is 1%.
In the quarterly commentary, this is what Yacktman said about the stock:
No. 2: Apollo Group Inc. (APOL), Buy: 1.82% of the portfolio - Total: 1,667,039 Shares
Apollo Group, Inc. has been providing higher education to working adults for over 25 years. Apollo Group Inc. has a market cap of $5.56 billion; its shares were traded at around $38.24 with a P/E ratio of 7 and P/S ratio of 1.1. Apollo Group Inc. had an annual average earning growth of 26.4% over the past 10 years. GuruFocus rated Apollo Group Inc. the business predictability rank of 4-star.
No. 3: Stryker Corp. (SYK), Add: 1.81% of the portfolio - Total: 1,856,408 Shares
Stryker Corporation develops, manufactures, and markets specialty surgical and medical products, including orthopaedic implants, bone cement, trauma systems used in bone repair, powered surgical instruments, endoscopic systems, craniomaxillofacial fixation devices, specialty surgical equipment used in neurosurgery and patient care and handling equipment for the global market and provide outpatient physical and occupational rehabilitation services. Stryker Corp. has a market cap of $19.31 billion; its shares were traded at around $49.31 with a P/E ratio of 15.1 and P/S ratio of 3. The dividend yield of Stryker Corp. stocks is 1.2%. Stryker Corp. had an annual average earning growth of 15.9% over the past 10 years. GuruFocus rated Stryker Corp. the business predictability rank of 4-star.
Yacktman commented on the medical device in his quarterly letter:
No. 4: HewlettPackard Company (HPQ, Financial), Add: 1.81% of the portfolio - Total: 2,395,956 Shares
Hewlett Packard is one of the global providers of computing and imaging solutions and services for business and home. Hewlettpackard Company has a market cap of $96.33 billion; its shares were traded at around $42.49 with a P/E ratio of 9.8 and P/S ratio of 0.9. The dividend yield of Hewlettpackard Company stocks is 0.7%. Hewlettpackard Company had an annual average earning growth of 26.5% over the past 5 years.
No. 5: Microsoft Corp. (MSFT, Financial), Add: 1.26% of the portfolio - Total: 11,150,466 Shares
Microsoft develops, manufactures, licenses, and supports a wide range of software products for a multitude of computing devices. Microsoft Corp. has a market cap of $234.95 billion; its shares were traded at around $26.95 with a P/E ratio of 12.9 and P/S ratio of 3.7. The dividend yield of Microsoft Corp. stocks is 2%. Microsoft Corp. had an annual average earning growth of 12.6% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 3-star.
This is what Yacktman said about the stock in his quarterly commentary:
Read his full letter here.
Check out Donald Yacktman’s complete stock portfolio by clicking on his name.
As a bottom-up investor, he mostly talked about his portfolio movements. During the past quarter, while he stayed with high quality stocks, he also took advantage of the plunge in price of stocks that were out of favor sometimes during the past quarter. In particular, he defended his decision of buying education providers such as Apollo Group (APOL, Financial) and Health Care stocks such as Stryker (SYK, Financial). Both sectors have undergone some kind of government intervention and Yacktman sees opportunities in them:
(Source: Bloomberg)
Here are the top Yacktman purchases and his holding history. We also incorporate comments he made in his latest quarterly commentary on a few individual stocks:
No. 1: News Corp. (NWSA, Financial), Add: 2.18% of the portfolio - Total: 36,683,277 Shares
NEWS CORPORATION is a diversified entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers and information services; book publishing; and other. News Corp. has a market cap of $26.78 billion; its shares were traded at around $14.51 with a P/E ratio of 15.1 and P/S ratio of 0.8. The dividend yield of News Corp. stocks is 1%.
In the quarterly commentary, this is what Yacktman said about the stock:
News Corp appreciated solidly during the quarter, though we think it remains extremely undervalued. Cable content has continued to deliver strong results, and for both the quarter and the year that segment grew pre-tax profits by more than 30%. Cable networks now represent approximately 50% of total pre-tax profits for News Corp. The company is currently negotiating for higher fees for its cable channels and The Fox Network, which we think could lead to a substantial increase in profits.
It is unusual for value buyers like us to get to own a business or significant business unit that has grown as rapidly News Corp’s cable content has because the valuation is usually too high. In the last three years, even though there has been a recession, the cable network segment has doubled operating profits. In the last five years pre-tax profits have tripled, and they are up an astonishing 25+-fold over the last decade. However, News Corp trades at only 12-13 X our estimate of the next twelve months of free cash flow. We view this as an incredible bargain, especially given the bright future we see for the cable content business.
Last year, Chase Carey rejoined News Corp as President and COO, stepping down as CEO of DirectTV, which was arguably the best-run pay television provider during Mr. Carey’s tenure there. It is rare to see a highly successful CEO of a major company leave for a new position without continuing to hold the CEO title. We think Mr. Carey made the move because he recognized significant untapped potential in News Corp’s businesses, especially its cable content and The Fox Network. We believe Mr. Carey is a significant asset to the company, especially during the current fee negotiations.
No. 2: Apollo Group Inc. (APOL), Buy: 1.82% of the portfolio - Total: 1,667,039 Shares
Apollo Group, Inc. has been providing higher education to working adults for over 25 years. Apollo Group Inc. has a market cap of $5.56 billion; its shares were traded at around $38.24 with a P/E ratio of 7 and P/S ratio of 1.1. Apollo Group Inc. had an annual average earning growth of 26.4% over the past 10 years. GuruFocus rated Apollo Group Inc. the business predictability rank of 4-star.
No. 3: Stryker Corp. (SYK), Add: 1.81% of the portfolio - Total: 1,856,408 Shares
Stryker Corporation develops, manufactures, and markets specialty surgical and medical products, including orthopaedic implants, bone cement, trauma systems used in bone repair, powered surgical instruments, endoscopic systems, craniomaxillofacial fixation devices, specialty surgical equipment used in neurosurgery and patient care and handling equipment for the global market and provide outpatient physical and occupational rehabilitation services. Stryker Corp. has a market cap of $19.31 billion; its shares were traded at around $49.31 with a P/E ratio of 15.1 and P/S ratio of 3. The dividend yield of Stryker Corp. stocks is 1.2%. Stryker Corp. had an annual average earning growth of 15.9% over the past 10 years. GuruFocus rated Stryker Corp. the business predictability rank of 4-star.
Yacktman commented on the medical device in his quarterly letter:
We added to our holdings in healthcare equipment companies during the quarter. Our medical device positions include Johnson & Johnson, CR Bard, Becton Dickinson, Stryker, and Covidien in both funds and a small position in Medtronic in The Yacktman Fund. These stocks have generally been under pressure due to concerns about the changes in the American healthcare system as well as a medical device excise tax that is due to begin in 2013. The medical device companies we own sell products that are necessary for treating an aging population around the world and generally posted solid growth through the recession. All of the companies sell at low multiples to cash flow and earnings.
No. 4: HewlettPackard Company (HPQ, Financial), Add: 1.81% of the portfolio - Total: 2,395,956 Shares
Hewlett Packard is one of the global providers of computing and imaging solutions and services for business and home. Hewlettpackard Company has a market cap of $96.33 billion; its shares were traded at around $42.49 with a P/E ratio of 9.8 and P/S ratio of 0.9. The dividend yield of Hewlettpackard Company stocks is 0.7%. Hewlettpackard Company had an annual average earning growth of 26.5% over the past 5 years.
No. 5: Microsoft Corp. (MSFT, Financial), Add: 1.26% of the portfolio - Total: 11,150,466 Shares
Microsoft develops, manufactures, licenses, and supports a wide range of software products for a multitude of computing devices. Microsoft Corp. has a market cap of $234.95 billion; its shares were traded at around $26.95 with a P/E ratio of 12.9 and P/S ratio of 3.7. The dividend yield of Microsoft Corp. stocks is 2%. Microsoft Corp. had an annual average earning growth of 12.6% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 3-star.
This is what Yacktman said about the stock in his quarterly commentary:
Microsoft’s stock appreciated in the third quarter, but underperformed the overall market, and is still down for the year. The poor share price performance year-to-date was posted despite solid earnings, reasonable prospects, and an inexpensive valuation. Over the next 12 months, we think the company can generate approximately $2.50 per share in free cash flow. At current levels, after subtracting the excess cash and securities on the balance sheet, we own the stock at only a bit more than 8 times our expectation of the next 12 months of free cash flow. At this price, we do not even need growth to have a successful investment; we just need the business to avoid meaningful decline.
Read his full letter here.
Check out Donald Yacktman’s complete stock portfolio by clicking on his name.
