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Donald Yacktman - "Wouldn't Be Surprised" to See PepsiCo up 150% over 10 Years

February 09, 2012 | About:
The Science of Hitting

The Science of Hitting

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Donald Yacktman, who runs the Yacktman Funds, has a stellar track record; in the past three, five, ten, and fifteen-year periods, the fund has beat more than 99% of its peers. To me, that says one thing: This is someone worth listening to.

On Thursday, Mr. Yacktman appeared on CNBC to talk about one of his top holdings, PepsiCo (PEP). The company reported fourth-quarter results Thursday morning, made a few big announcements, including that they would cut 8,700 globally and increase marketing by $500-$600 million in 2012. Here are some of the highlights from his commentary:

On the drop in price today – “A long-term investor will be happy to see the opportunity to buy a great business at a lower price.”

Why the Yacktman Funds likes PEP – “We buy companies based on very long-term horizon times; we buy risk adjusted forward rates of return… this company has a great business model.”

Long term potential – “I wouldn't be surprised to see between the dividends and the price appreciation to make 150% over ten years."

At the price of roughly $64, that 150% is good for an annualized return of 9.6% per annum; if the price were to hit $60 a share, the return under the same 10-year price assumption would jump to 10.3% per annum.



About the author:

The Science of Hitting
I'm a value investor, with a focus on patience; I look to buy great companies that are suffering from short term issues, and hope to load up when these opportunities present themselves. As this would suggest, I run a fairly concentrated portfolio by most standards, usually with 8-10 names; from the perspective of a businessman rather than a market participant / stock trader, I believe this is more than sufficient diversification.

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.

Rating: 4.5/5 (16 votes)

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