The supreme performance is not a coincidence. His triumph is the victory of value investing principles:
Wall Street Journal conducted an interview with Donald Yacktman and his son Steven Yacktman. The transcript is reprinted in the Yacktman Fund website and I found it is very interesting reading.
In WSJ the interview, The Yacktmans revealed their investment process:
The investment process or philosophy has evolved over a period of years. Basically, we are investors in businesses and we view the selection process as though we were buying a long-term bond. Our logo is a triangle. The base of the triangle is a low purchase price. We look at businesses as if we were going to buy them and own them for a long period of time. We look at the rate of the return we would earn and the quality of those businesses. The higher the quality is, the lesser the required rate of return. It’s very much like a person buying a bond. But we don’t like to calculate returns to the fourth decimal; we try to make sure we have a lot of room for error. Then we try to get as much as we can of the other two sides of the triangle, namely good businesses run by shareholder-oriented managers.
GuruFocus is very happy to bring users the opportunity to ask the star money manager questions (together with another son of his Brian Yacktman). To facilitate the event, we want to look at his portfolio from different angles.
Here are a few of his low P/E stocks. Some of them might be rather controversial. Don’t ask me why, ask the Yacktmans.
Gannett Co. Inc. (GCI) -- P/E = 4.4
Gannett Co. Inc. is an international news and information company that publishes daily newspapers in the USA. The company also owns in excess of 400 non-daily publications in the USA and USA WEEKEND a weekly newspaper magazine. Gannett subsidiary Newsquest is the United Kingdom's second largest regional newspaper company. Newsquest publishes more than 300 titles including 15 daily newspapers and a network of prize-winning Web sites. Gannett also operates 22 television stations in the United States. Gannett Co. Inc. has a market cap of $2.38 billion; its shares were traded at around $10.14 with a P/E ratio of 4.4 and P/S ratio of 0.3. The dividend yield of Gannett Co. Inc. stocks is 1.5%. Gannett Co. Inc. had an annual average earning growth of 4.9% over the past 10 years.
This is not a successful investment for Yacktman. Fortunately, he does not own too much of the stock. Our record shows he owned 15,600 shares as early as 2001 when the stock was at near $65, he has held most of the shares through the times. Needless to say, the stock has dropped dramatically.
News Corp. (NWS-A) -- P/E = 6.86
NEWS CORPORATION is a diversified entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers and information services; book publishing; and other. The activities of News Corporation are conducted principally in the United States Continental Europe the United Kingdom Australia Asia and the Pacific Basin. News Corp. has a market cap of $15.45 billion; its shares were traded at around $0 with a P/E ratio of 6.86 and P/S ratio of 0.47. The dividend yield of News Corp. stocks is 1.41%. News Corp. had an annual average earning growth of 17.2% over the past 5 years.
Yacktman bought 2.5 million in 4Q08 and increased to 8.5 million during 1Q and 2Q of 2009.
Pfizer Inc (PFE) -- P/E = 7.4
Pfizer Inc is a research-based global pharmaceutical company that discovers and develops innovative value-added products that improve the quality of life of people around the world and help them enjoy longer healthier and more productive lives. Pfizer has three business segments: health care animal health and consumer health care. Its products are available in numerous countries. (Company Press Release) Pfizer Inc has a market cap of $113.39 billion; its shares were traded at around $16.8 with a P/E ratio of 7.4 and P/S ratio of 2.3. The dividend yield of Pfizer Inc stocks is 3.8%. Pfizer Inc had an annual average earning growth of 11% over the past 10 years. GuruFocus rated Pfizer Inc the business predictability rank of 2.5-star.
Yacktman started to own a small position in 2001. Yacktman bought 1.3 million in 2Q06 but sold down to less than one million shares in 4Q08. In 2Q09, he increased all the way to 4.2 million shares.
ConocoPhillips (COP) -- P/E = 7.7
ConocoPhillips is a major international integrated energy company with operations in some 49 countries. Conocophillips has a market cap of $69.16 billion; its shares were traded at around $46.64 with a P/E ratio of 7.7 and P/S ratio of 0.3. The dividend yield of Conocophillips stocks is 4.1%. Conocophillips had an annual average earning growth of 19% over the past 10 years.
Yacktman started to own a small position (36K shares) in 2Q06 and in2Q09, he increased from 300L to 1.05 million shares.
WellPoint Inc. (WLP) -- P/E = 9
WellPoint Inc. is the largest publicly traded commercial health benefits company in terms of membership in the United States. WellPoint Inc. is an independent licensee of the Blue Cross and Blue Shield Association and serves its members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado Connecticut Georgia Indiana Kentucky Maine Missouri Nevada New Hampshire Ohio Virginia (excluding the Northern Virginia suburbs of Washington D.C.) Wisconsin; and through HealthLink and UniCare. Wellpoint Inc. has a market cap of $25.51 billion; its shares were traded at around $53.7 with a P/E ratio of 9 and P/S ratio of 0.4.
This is a relatively new holding for Yacktman, he bought 100,000 shares in 3Q08 and increased to 188,500 shares in 4Q08.
UnitedHealth Group Inc. (UNH) – P/E=9.1
UnitedHealth Group Inc. offers health care coverage and related services to help people achieve improved health and well-being through all stages of life. The company's products and services reflect a number of core capabilities including medical information management health benefit administration care coordination risk assessment and pricing health benefit design and provider contracting. With these capabilities it is able to provide comprehensive health care management services through organized health systems and insurance products. Unitedhealth Group Inc. has a market cap of $32.06 billion; its shares were traded at around $27.58 with a P/E ratio of 9.1 and P/S ratio of 0.4. The dividend yield of Unitedhealth Group Inc. stocks is 0.1%. Unitedhealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated Unitedhealth Group Inc. the business predictability rank of 5-star.
Yacktman held a small position (12,000 shares) since 1Q07 but increased substantially in recent quarters. In 2Q09, he owns 753,300 shares.
Yacktman’s low P/W holdings are in media and health care areas. Perhaps that is where values are these days after the sharp market runup.
GuruFocus provides real time information and insights of Investment Gurus such as Buffett and Yacktman for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
To ask Yacktman a question, please follow our original announcement thread or reply to this message. As a bonus, you can also ask Brian Yacktman questions. Brian is a son of Don Yacktman, he uses option to enhance returns and manage risks.
To know more about Yacktman and his funds, go to The Yacktman Funds website
To know more about Brian Yacktman and his strategy, go to Yacktman Capital Group, LLC (YCG)
Watch this bloomberg interview to learn more about his investment process and current outlook: