Some investors can beat the market in up years; some others may be able to do it in down years, but it is very hard to beat the market in both. Donald Yacktman seems to be doing just that.
In 2008, when the market lost 37% and a lot of other value investors did even worse, Yacktman Fund did better than the market by 11%. At the bottom of the market declines, he shifted heavily into beaten down distressed companies, and gained 59.31% in 2009. According to his shareholder letter just released, he fund did better than the market by about 2% in the first half of 2010.
This gives Yacktman Fund a total return of 35% over the past 5 years, and 206.8% over the past 10 years. In the same periods, the S&P400 lost 3.9% and 14.79%, respectively.
Not surprisingly, Yacktman Funds has seen his asset under management ballooned to more than $3 billion over past 12 months, after below $1 billion for more than a decade. This is the chart:
Currently Mr. Yacktman is heavily invested in high quality holdings. He commented: “We strive to be as objective as possible in evaluating all opportunities, and if the best businesses in the world are available at compelling valuations we are willing to own big positions in them. We sleep well at night knowing that dominant, well capitalized companies purchased at attractive valuations should produce solid results over time, even in a world with an extreme amount of uncertainty.”
But they are flexible, as they did buy heavily into distressed situations at the market low of 2009. “We are willing to own lower quality business, but we have to project a meaningfully higher expected rate of return on the investment. Currently, we think most of the best values are in the highest quality companies.”
These are the comments of Yacktman Fund on some of their largest holdings:
PepsoCo (NYSE:PEP) – 9.94% of the Total Portfolio“Frito Lay, the most valuable division of PepsiCo, is the dominant snack chip company in the world. This business has significantly higher market share than any of its competitors, and its dominant market share produces substantially higher margins than most other packaged food companies. Strong distribution and innovation have allowed Frito Lay to grow faster than other large food companies. Outside of snack chips, PepsiCo has a collection of solid businesses including Pepsi, Tropicana, Quaker Oats and Getorade.”
Pepsico Inc. has a market cap of $103.55 billion; its shares were traded at around $64.21 with a P/E ratio of 17.1 and P/S ratio of 2.4. The dividend yield of Pepsico Inc. stocks is 3%. Pepsico Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 4-star.
News Corp (NASDAQ:NWSA) – 10.19% of the Total Portfolio“News Corporation is a global media conglomerate. In the last decade-plus, Rupert Murdock has transformed the company from somewhat cyclical, advertising-based businesses like newspapers and network television, to more recurring revenue businesses like cable content. We expect the cable content business, which was in its infancy a little more than a decade ago, to produce approximately 50% of News Corporation’s pre-tax profits in the next 12 months”
News Corp. has a market cap of $23.65 billion; its shares were traded at around $12.97 with a P/E ratio of 13.2 and P/S ratio of 0.8. The dividend yield of News Corp. stocks is 1.3%.
Coca-Cola – 8.44% of the Total Portfolio“Coca-Cola products account for nearly 3% of beverage consumption around the world. ncreased per capita consumption and global expansion have driven more than a century of growth. Today, Coca-Cola is primarily an international company; the stagnant North American business is a minority of operating profits. Due to a strong presence in key emerging markets, we expect Coca-Cola’s growth will continue for a long time in the future.”
The Coca-Cola Company has a market cap of $125.18 billion; its shares were traded at around $54.26 with a P/E ratio of 17 and P/S ratio of 4.1. The dividend yield of The Cocacola Company stocks is 3.2%. The Cocacola Company had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated The Cocacola Company the business predictability rank of 3.5-star.
Clorox - 5.12% of the Total Portfolio“Clorox is a leading household products company, owning a diverse group of well-known brands, including Glad, Clorox Bleach, Kingsford Charcoal, Brita, Armor All and Hidden Valley Ranch. These are products that consumers purchase and use in both good economies and bad. Clorox has extremely high market share in many of its brands, which translates into high margins and strong free cash generation.”
The Clorox Company has a market cap of $9.15 billion; its shares were traded at around $64.94 with a P/E ratio of 15 and P/S ratio of 1.7. The dividend yield of The Clorox Company stocks is 3.1%. The Clorox Company had an annual average earning growth of 10.7% over the past 10 years. GuruFocus rated The Clorox Company the business predictability rank of 3-star.
Pfizer – 5.22% of the Total Portfolio
“Pfizer is the largest pharmaceutical company in the world. Pharmaceuticals are a cost effective way to treat an aging population. However, Pfizer is the least predictable business of the five in this list because it is fighting patent expirations, pricing controls, and greater competition than consumer or subscriber based businesses.”
Pfizer Inc has a market cap of $119.46 billion; its shares were traded at around $14.81 with a P/E ratio of 7.1 and P/S ratio of 2.5. The dividend yield of Pfizer Inc stocks is 4.9%. Pfizer Inc had an annual average earning growth of 1.8% over the past 10 years.