Donald Yacktman Buys Staples and Tesco in the First Quarter
For the last several years, Yacktman has been favoring high-quality, predictable companies, a strategy that helped his Yacktman Focused Fund (YAFFX) achieve a 30.33% annualized return over the last three years. For the first quarter of 2012, the fund returned 6.76%, short of the recovering S&P 500’s 12.59% return, according to his fourth-quarter letter.
Donald Yacktman bought 2,235,000 shares of Staples Inc. (SPLS) at an average price of $15.50 in the first quarter. The stock accounts for 0.25 percent of his portfolio.
On February 4, Staples announced its financial results for the fiscal year ended January 28. The company’s sales increased 2 percent to $25 billion and net income increased 12 percent to $985 million. While sales increased in all of its North American Delivery, North American Retail and International Operations segments for the full year, fourth-quarter sales in its International Operations segment decreased 5% to $1.3 billion from the previous year. The drop was mainly due to a nine percent decrease in comparable store sales in Europe and weak sales in Australia. The company opened six stores and closed nine stores in its international segment in the year, ending with 378 stores.
For its 2012 outlook, the company is taking into account slow growth in the U.S. economy and weak demand in Europe. They expect full-year sales to increase in the low single-digits and earnings per share to increase in the high single digits. Free cash flow is expected to be $1 billion.
Staples also boosted its quarterly dividend 10 percent to $0.11 per share compared to $0.10 per share the previous quarter.
In February, GuruFocus reported that Staples was trading near historical low P/S ratio, and today it is still in the same range.
Donald Yacktman bought 136,500 shares of Tesco Plc (TSCDY) in the first quarter, which accounts for $0.015 per share.
Tesco Plc is the UK's largest retailer and one of the world's international retailers. Tesco Plc has a market cap of $41.5 billion; its shares were traded at around $15.79 with and P/S ratio of 0.4. The dividend yield of Tesco Plc stocks is 7.3%. Tesco Plc had an annual average earnings growth of 1.5% over the past 10 years.
Tesco announced record group preliminary results for the year 2011 on April 18. Tesco’s group sales increased 7.4 percent to £72 billion, and statutory profit before tax increased 5.3 percent to £3.8 billion.
"Whilst our International business is delivering excellent growth, contributing £1.1 billion of profit to the Group, we fully recognise that we need to raise our game in the UK. As a result, we are committing over £1 billion to make the UK shopping trip better for customers: more staff giving improved service in-store; refreshed stores that are better and easier places to shop; lower prices and even more value from an improved product range. As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too.
Tesco is one of Warren Buffett’s international holdings. He owns 3.6% of the company. Buffett first bought shares in 2006 and added more both in 2010 and 2011.
See Donald Yacktman's equity portfolio here.