Donald Yacktman, who engineers the long-term-focused Yacktman Funds, has updated his first quarter portfolio. Unsurprisingly for an investor who thinks in half and full decades, his Yacktman Fund featured low turnover of 5%, with two new stocks introduced: Sigma Aldrich Corporation (SIAL) and CH Robinson Worldwide Inc. (CHRW).
The Yacktman Fund returned 11.5% last year, compared to the S&P 500 Index’s 16%, with its portfolio of what managers deem “extremely high quality companies.” The fund is still on track ahead of the benchmark over the past 10 years with a 10.63% average annual return compared to the index’s 7.1%. It is the top-performing mutual fund in its category for the past decade.
Donald Yacktman focuses on forward risk-adjusted rates of return as well as price in his stock analysis. His team’s best ideas are concentrated in his largest positions, while less attractive ideas take smaller fractions of investment capital. The two new holdings have relatively small and medium-sized weightings within his portfolio.
Largest New Buy: CH Robinson Worldwide Inc. (CHRW)
CH Robinson Worldwide’s stock price declined for five straight quarters in 2011 and 2012, and increased slightly when Yacktman purchased in the first quarter. He bought 1.75 million shares at an average price of $61. The position size represents 1.22% of his portfolio.
CH Robinson is a third party logistics provider, offering freight transportation and logistics, outsource solutions, information services and produce sourcing throughout North America, South America, Europe, Asia and Australia. At $9.47 billion, the company has the largest market cap of competitors in its sector.
CHRW shares have moved just over 2% in the last five years, including a sharp 20% drop in February of the first quarter of 2013, when Yacktman initiated a position. On Feb. 5, when the decline began, the company announced its financial results for the quarter and full year ended Dec. 31, 2013.
CHRW announced a year-over-year fourth quarter and full-year increase in revenue of 15.7%, to $2.97 billion, and 9.9%, to $11.36 billion, respectively. Net income also increased 134.8%, to $256.39 million, and 37.6%, to $593.8 million, in the same periods.
Adjusted earnings missed expectations, however, causing the share decline.
The company acquired Poland-based Apreo Logistics S.A. and Chicago-based Phoenix International Freight Services Ltd. in the fourth quarter. It also divested its payment services business, T-Chek Systems, during the quarter. The recent acquisitions added substantially to the company’s financial results.
CHRW pays a dividend yield of 2.3%, close to a 10-year high. Its P/E ratio of 16.4 is nearing its 10-year low, and its P/B ratio of 6.49 is nearing its three-year low. The P/S ratio is 0.86.
Sigma-Aldrich Corporation (SIAL)
Yacktman purchased 564,100 shares of Sigma-Aldrich Corp., equal to 0.52% of his portfolio, at an average price of $77 in the fourth quarter. SIAL’s Friday share price of $76.41 is approaching its 10-year high, possibly in part explaining why it accounts for a modicum of Yacktman’s portfolio.
Sigma-Aldrich is a life science and high technology company creating buichemical and organic chemical products used in an array of scientific fields and pharmaceuticals. It operates in 40 countries.
Over the last five years the company grew at the average annual rate of 6.2% in revenue, 9.3% in EBITDA, 8.4% in free cash flow and 17.2% in book value.
In 2012, Sigma-Aldrich sales were $2.6 billion, a 5% increase from the previous year. Organic sales increased 3%, and acquisitions contributed 5% to sales growth, as it offset weaker demand in academic and pharma, and SAFC Hitech pricing challenges during the year. Net income was $460 million, or $3.80 per diluted share, increased slightly from $457 million, or $3.78 per diluted share, the previous year. It was the 38th consecutive year of EPS growth for the company.
In 2012, the Asia Pacific and Latin America regions led its global sales growth, while organic sales in China increased by double digits from the previous quarter. North American sales were flat.
Sigma-Aldrich is expecting organic sales growth in the low-to-mid single-digit range for 2013, and EPS, excluding any restructuring or special charges, in the range of $4.10 to $4.20.
The company’s dividend yield is 1.1%, just short of its two-year high. Its P/B of 3.61 is close to its lowest level in a year, while it’s P/S of 3.5% is near its highest point in 10 years. The company also has a P/E of 20.