On Thursday, Mr. Yacktman appeared on CNBC to talk about one of his top holdings, PepsiCo (NYSE: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:
As it relates to portfolio construction, my goal is to make a small number of meaningful decisions. In the words of Charlie Munger, "Patience followed by pretty aggressive conduct."
I run a concentrated portfolio, with a handful of positions accounting for the majority of my equity holdings (currently two). From the perspective of a businessman, I believe this is adequate diversification.