The Yacktman Focused Fund recently disclosed its portfolio update for the second quarter of 2020, which ended on June 30.
Operating as part of the Austin, Texas-based value investing firm Yacktman Asset Management, the fund is managed by Stephen Yacktman and Jason Subotky. It seeks long-term capital appreciation with a secondary focus on income, investing primarily in the common stocks of undervalued U.S. large-cap companies (though a significant portion of holdings are international companies). The portfolio managers also look for shareholder-oriented management teams.
Based on its investing criteria, the fund added to or reduced its positions in 24 of its common stock holdings during the quarter, including selling 63.01% of its stake in Oracle Corp. (ORCL) and adding 268.05% to its investment in Sodexo (XPAR:SW) It also established four new holdings: Ambev SA (ABEV, Financial), Ingredion Inc. (INGR, Financial), Yuasa Trading Co Ltd (TSE:8074, Financial) and Mitsuboshi Belting Ltd (TSE:5192, Financial).
Ambev SA
The fund established a new holding of 7,000,000 shares in Ambev SA, impacting the equity portfolio by 0.79%. Shares traded for an average price of $2.36 during the quarter.
Ambev is a Brazilian brewing company that was formed from the merger of the Brahma and Antarctica breweries in 1999. It mainly produces beer, though it also produces and distributes soft drinks and other non-alcoholic beverages. It has exclusive bottling rights for Pepsi (PEP) products in Brazil.
On July 23, shares of Ambev traded around $2.79 for a market cap of $43.90 billion and a price-earnings ratio of 21.87.
GuruFocus gives the stock a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 3.81 and Altman Z-Score of 4.25 point to a strong balance sheet that beats 70.21% of competitors. The ROIC (return on invested capital) is consistently higher than the WACC (weighted average cost of capital), indicating that the company is efficient in growing its capital.
Ingredion Inc.
The fund also acquired 180,000 shares of Ingredion Inc., impacting the equity portfolio by 0.63%. During the quarter, shares traded for an average price of $81.70.
Ingredion is an American multinational food ingredients provider with leading global positions in sweeteners, starches and nutrition ingredients, as well as biomaterials used for everything from food to pharmaceuticals.
On July 23, shares of Ingredion traded around $87.20 for a market cap of $5.84 billion and a price-earnings ratio of 15.18.
GuruFocus gives the stock a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. While the interest coverage ratio of 9.04 is about average for the industry, the Altman Z-Score of 3.59 indicates the company is financially stable. The operating margin and net margin have declined slightly in recent years, though both are still higher than the averages from the past decade.
Yuasa Trading Co Ltd
The fund invested in 246,000 shares of Yuasa Trading Co Ltd, which had a 0.28% impact on the equity portfolio. Shares traded for an average price of 2,952.83 Japanese Yen ($27.64) during the quarter.
Japan-based Yuasa Trading Co Ltd primarily operates as a trader of various industrial machinery. It also wholesales a wide variety of materials for the construction, medical, electric and communication fields, among others.
On July 23, shares of Yuasa traded around ¥2,999 for a market cap of ¥66.57 billion and a price-earnings ratio of 7.49.
GuruFocus gives the stock a financial strength rating of 7 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 9.74 is very promising, but the equity-to-asset ratio of 0.34 is lower than 80.29% of competitors, indicating that the company is asset-heavy. The company has steadily grown both its top and bottom lines in recent years, with a three-year revenue growth rate of 3.3%.
Mitsuboshi Belting Ltd
The fund bought 91,535 shares of Mitsuboshi Belting Ltd, impacting the equity portfolio by 0.06%. During the quarter, shares traded for an average price of ¥1,519.86.
Mitsuboshi is a Japanese processor of rubber and other plastic and resin materials. Its products include conveyor belts, V-belts and both interior and exterior automobile parts.
On July 23, shares of Mitsuboshi traded around ¥1,835for a market cap of ¥53.36 billion and a price-earnings ratio of 10.01.
GuruFocus gives the stock a financial strength rating of 8 out of 10 and a profitability rating of 7 out of 10. The interest coverage ratio of 128.07 and cash-debt ratio of 4.34 indicate that the company has plenty of liquidity to cover its debt. The company saw its growth slow down in 2019 with a three-year Ebitda growth rate of 5.1%, ranking lower than 67.26% of competitors, though the operating margin remained significantly above the industry median at 10.11%.
Portfolio overview
As of the quarter’s end, the fund held shares in 47 stocks valued at a total of $2.35 billion. The top holdings were Samsung Electronics Co Ltd (XKRX:005935) with 17.21% of the equity portfolio, Bollore SA (XPAR:BOL) with 6.4% and Fox Corp. (FOX) with 5.07%.
In terms of sector weighting, the fund was most invested in technology, consumer defensive and communication services.
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Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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