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Before we get into his top holdings as of the yearend, here is a fresh video clip featuring Don Yacktman being interviewed by Bloomberg. Today, Donald talked with Bloomberg's Carol Massar about his investment strategy. Yacktman also discussed his investment in Coca-Cola, the outlook for Viacom Inc., and market concerns with government budget deficits.
In the interview, Yacktman stated that he would rather hold Coca-Cola stock then gold.
Sector Weighting Shifts
For the quarter ended on December 31, 2009, he has increased holdings in Consumer Goods and Health Care, and reduced just about everything else. He is a concentrated and bottom-up investor, so a lot of the sector weighting shift might as well due to a number of position changes, not necessarily reflecting his opinion towards the specific sector. So the analysis may not be as meaningful as it sounds.
4Q09 Top Holdings
These are his top holdings as of December 31, 2009:
No. 1: News Corp. (NASDAQ:NWSA), Weighting: 10.06% - 16,982,915 Shares
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. News Corp. has a market cap of $23.52 billion; its shares were traded at around $12.91 with a P/E ratio of 16.3 and P/S ratio of 0.8. The dividend yield of News Corp. stocks is 1%.
Yacktman bought another 4.7 million shares during 4Q09. He started to buy into the company in 4Q08, a year ago, and has increased shares each quarter since then.
No. 2: PepsiCo Inc. (NYSE:PEP), Weightings: 9.92% - 3,772,950 Shares
PepsiCo, Inc. consists of: Frito-Lay Company, Pepsi-Cola Company, and Tropicana Products. Pepsico Inc. has a market cap of $93.7 billion; its shares were traded at around $60.05 with a P/E ratio of 16.3 and P/S ratio of 2.1. The dividend yield of Pepsico Inc. stocks is 2.9%. Pepsico Inc. had an annual average earning growth of 8.4% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 2.5-star.
Yacktman likes this stock and has traded in and out of this stock since as far as 2002. In the two years, he sold down from 1.08 million shares in 3Q08 to about 637 thousand shares in 1Q09. But since then, he has been buying shares back, and just added 1.5 million shares in 4Q09.
No. 3: The CocaCola Company (NYSE:KO), Weightings: 8.28% - 3,357,890 Shares
The Coca-Cola Company is the world's largest beverage company and is the producer and marketer of soft drinks. The Cocacola Company has a market cap of $125.15 billion; its shares were traded at around $54.01 with a P/E ratio of 17.8 and P/S ratio of 3.9. The dividend yield of The Cocacola Company stocks is 3%. The Cocacola Company had an annual average earning growth of 5.3% over the past 10 years. GuruFocus rated The Cocacola Company the business predictability rank of 2.5-star.
Same story here as with PepsiCo: apparently Yacktman uses Coke’s and Pepsi’s as a preservation for value, and when time gets bad, he unleashes the value in these holdings and buy things that have been beaten down far more severe. When things returned to normal, he is back to Coke’s and Pepsi’s. He has sold some shares in 4Q08 and 1Q09 but has since rebuilt his position. He bought about 0.8 million shares in 4Q09.
No. 4: Viacom Inc. (VIA-B), Weightings: 6% - 4,668,376 Shares
Viacom is a global entertainment content company whose family of prominent and respected brands includes the multiplatform properties of MTV Networks, BET Networks, Paramount Pictures, Paramount Home Entertainment and DreamWorks. Viacom Inc. has a market cap of $15.95 billion; its shares were traded at around $28.75 with a P/E ratio of 12 and P/S ratio of 1.1.
Yacktman increased his position slightly in 4Q09. He likes the cable content as well as the distribution company.
No. 5: Microsoft Corp. (NASDAQ:MSFT), Weightings: 6% - 4,547,555 Shares
Microsoft develops, manufactures, licenses, and supports a wide range of software products for a multitude of computing devices. Microsoft Corp. has a market cap of $248.7 billion; its shares were traded at around $28.01 with a P/E ratio of 14.9 and P/S ratio of 4.2. The dividend yield of Microsoft Corp. stocks is 1.9%. Microsoft Corp. had an annual average earning growth of 10% over the past 10 years.
Yacktman actually reduced holding in MSFT slightly, from 4.655 million shares to 4.547 million shares.
In a June 2009 interview with The Wall Street Transcript (TWST), Stephen Yacktman, Donald Yacktman’s son and co-manager of the Yacktman Funds provided the following perspective on Microsoft:
Stephen Yacktman: Two things showed up in the technology area, and those were eBay (EBAY) and Microsoft (NASDAQ:MSFT). Microsoft at this multiple of cash flow is extremely cheap. It has a dominant position. Vista has been a disaster. I pride myself in my technical expertise and I’ve worked with Vista personally on a technical level and I can’t stand it. But again, we put our personal feelings aside and look at the market position of Microsoft and hope they’re going to come out with a better product. Clearly, they were able to deliver an inferior product to the market and people had to accept it anyway, and if that doesn’t show market positioning, I don’t know what does. When we look at Microsoft, we see a couple of things. One, they have a lot of expenses which they’d call investments; I’d call them expenses and I’d question their necessity. There is a lot of room for improvement there. If they deliver a good product consumers actually want, we can have a lot of traction in terms of earnings power on the upside. In the meantime, at this price, it makes a very attractive investment in terms of rate of return. Generally, we don’t end up with technology stocks. The Microsoft position was first initiated in the low $20s a few years back and it has performed quite well on a relative basis. It was cheap then and it’s cheap now.
No. 6: Pfizer Inc (NYSE:PFE), Weightings: 5.89% - 7,487,745 Shares
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 Inc has a market cap of $144.28 billion; its shares were traded at around $17.88 with a P/E ratio of 8.8 and P/S ratio of 2.9. The dividend yield of Pfizer Inc stocks is 4%. Pfizer Inc had an annual average earning growth of 11% over the past 10 years.
We often compare Yacktman to another Guru Bruce Berkowitz. Berkowitz is know for reducing his position in Pfizer sharply in his recent filing, but here we observed Yacktman actually increased his holding in PFE by about one million shares. We will see in long run, who will be the smarter one here.
Donald Yacktman consolidated his holding in high-quality large-cap consumer franchise stocks.
If you have not done so, you are invited to read our two-part coverage (Part I and Part II). It provides Donald Yacktman’s investment methodology in detail and their comments for many of their top holdings above.
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