In a recent interview (here), Consuelo Mack of Wealth Track spoke with Donald Yacktman, who runs the Yacktman Funds; for those searching for a successful investment strategy, look no further: in the past three, five, ten, and fifteen year periods, the fund has beat more than 99% of its’ peers. During the interview, Mr. Yacktman had this to say:
“I’ve been doing this for over forty years, and I can’t remember another period of time where I’ve seen so many high quality, profitable businesses selling at prices relative to the market this cheaply. To give you an illustration, the 30 year treasury today [January 5th, 2012] has a lower yield than many of these companies like Pepsi (PEP) or Johnson & Johnson (JNJ) or Procter & Gamble (PG). That’s a very unique period of time.”
At the close on Friday, the 30-year Treasury yielded 3.07%. This compares to 3.13% for PepsiCo, 3.27% for Procter & Gamble, and 3.48% for Johnson & Johnson; in addition, while the Treasury yield will stay stagnant for more than a quarter of a century, lets look at how these compaanies have faired historically: since 1987, PEP, PG, and JNJ have increased their dividend payouts (per share) more than ten-fold.
As I noted above, it’s easy to step back from the markets while developed markets muddle along and deal with piles of debt; for long term investors, now is the time to buy great businesses and to profit on the short-term blindness of the herd.
About the author:
I hope to own a collection of great businesses; to ever sell one, I would demand a substantial premium to the average market valuation due to what I believe are the understated benefits to the long term investor of superior fundamentals and time on intrinsic value. I don't have a target when I purchase a stock; my goal is to replicate the underlying returns of the business in question - which if I've done my job properly, should be very attractive over many years.