In the era when the only thing matters is performance, Yacktman’s two funds have witnessed that value investing truly works:
AS OF: May 31, 2010
|The Yacktman Fund (YACKX)||0.13%||-0.07%||29.00%||4.93%||7.05%||13.00%||9.80%|
|The Yacktman Focused Fund (YAFFX)||-0.56%||-0.12%||26.26%||6.65%||8.07%||13.26%||8.36%|
|S&P 500© Index||-1.50%||-0.89%||20.99%||-8.69%||0.31%||-0.82%||7.65%||4.20%|
With success, the manager gets rewarded too. Assset Under Management has been climbing for the past four quarters:
Consuelo Mack Interview
Recently, Consuelo Mack interviewed Donald Yackt:
In the interview Yacktman talked about the triangular paradigm he uses to scope a stock to invest: Low Purchase Price, Shareholder-Oriented Management, and Good Business. He discussed his valuation technique, central to which is the concept of forward cash yield. GuruFocus elaborated his investment approach in the following two write-ups:
· Donald Yacktman's Way (Part I)
· Donald Yacktman's Way (Part II)
Quarterly Investor Conference Call
Donald Yacktman had recently had a quarterly conference call. You can access the audio file here.
In the call, the management team discussed that their portfolio movements in the quarter. They reduced some of the positions that performed strongly during the past year, and added some of the high-quality blue chips issues. Essentially, their portfolio has made a round trip to that of 2007. The holdings are once again full of Coca-Cola and PepsiCo.
Yacktman 1Q10 Top Purchases
Here are the top purchases by Yacktman during 1Q10:
No. 1: The CocaCola Company (KO), Add: 2.76% of the portfolio - Total: 4,993,360 Shares
The Coca-Cola Company is the world's largest beverage company and is the producer and marketer of soft drinks. The Coca-Cola Company has a market cap of $120.68 billion; its shares were traded at around $52.31 with a P/E ratio of 16.4 and P/S ratio of 3.8. The dividend yield of The Coca-Cola Company stocks is 3.4%. The Coca-Cola Company had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated The Coca-Cola Company the business predictability rank of 3.5-star.
Yacktman has increased holdings in the stock in 1Q10 by about 1.6 million shares.
Yacktman commented on the company in the 1Q10 Quarterly Commentary:
Shares of Coca Cola declined slightly during the first quarter, and are attractively priced, especially given low level of risk we see for the business. Over time, emerging markets represent a significant
opportunity for growth. In 2009 the volume gains in China, India, Mexico and Brazil were equivalent to the total volume of Coca-Cola’s sixth largest market, Germany.
We are often asked how we expect to get market-beating returns owning consumer staple securities like Coca Cola. Here is how we look at it. Coca Cola should earn approximately $3.40 this year. After
making investments for growth, we expect the company to generate about $3 per share that it can use however it chooses. Based on the current share price, this equates to a free cash yield of approximately 5.5%. Over long periods of time we would expect the company to grow volume at 3-4% per year and raise prices by a couple of percentage points annually to nearly keep up with inflation.
In total, this gets us to a double-digit annual expected rate of return assuming the shares sell at a similar multiple of earnings/cash flow compared to today. Given the high degree of confidence we have about the business, this is a solid investment opportunity in the current environment.
Some think if an investment idea is well-known and seems obvious it can’t be really good. In 1938,
Fortune Magazine concluded “Several times every year, a weighty and serious investor looks long and with profound respect at Coca-Cola's record, but comes regretfully to the conclusion that he is looking too late.” Since that time, Coca-Cola has grown significantly both domestically and around the world. It was not too late in 1938, and we believe it is far from that today.
We look for predictability and quality, and would rather invest in a potentially lower projected rate of return if that means improving our risk/reward. Stretching to try to make a slightly higher return is never a good idea, and it usually leads to lower returns with higher risk. We believe our high quality approach has helped us protect capital far better than other managers in difficult environments.
No. 2: News Corp. (NWSA), Add: 2.67% of the portfolio - Total: 23,008,490 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 $25.51 billion; its shares were traded at around $14 with a P/E ratio of 14.3 and P/S ratio of 0.9. The dividend yield of News Corp. stocks is 1%.
Yacktman increased his holdings in the stock by about 7 million shares in 1Q10. Click here to view Yacktman’s holding history in this stock.
No. 3: PepsiCo Inc. (PEP), Add: 2.27% of the portfolio - Total: 4,890,541 Shares
PepsiCo, Inc. consists of: Frito-Lay Company, Pepsi-Cola Company, and Tropicana Products. Pepsico Inc. has a market cap of $103.34 billion; its shares were traded at around $64.08 with a P/E ratio of 17.1 and P/S ratio of 2.4. The dividend yield of Pepsico Inc. stocks is 3%. Pepsico Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 4-star.
Yacktman increased holdings in this stock by about 1.1 million shares during 1Q10. Click here to view Yacktman’s holding history in this stock.
No. 4: C.R. Bard Inc. (BCR), Buy: 2.22% of the portfolio - Total: 834,701 Shares
C.R. Bard, Inc. is one of the worldwide leaders in developing, manufacturing, and supplying healthcare products that focus on Vascular, Urology, and Oncology Disease States. C.r. Bard Inc. has a market cap of $7.64 billion; its shares were traded at around $80.3 with a P/E ratio of 15.5 and P/S ratio of 3. The dividend yield of C.r. Bard Inc. stocks is 0.9%. C.r. Bard Inc. had an annual average earning growth of 15.7% over the past 10 years. GuruFocus rated C.r. Bard Inc. the business predictability rank of 4.5-star.
This is a new purchase for Yacktman in 1Q10.
No. 5: Sysco Corp. (SYY), Buy: 2.2% of the portfolio - Total: 2,429,374 Shares
Sysco Corporation is the largest North American distributor of food and food related products to the foodservice or `food-prepared-away-from-home` industry. Sysco Corp. has a market cap of $18.4 billion; its shares were traded at around $31.11 with a P/E ratio of 16.6 and P/S ratio of 0.5. The dividend yield of Sysco Corp. stocks is 3.3%. Sysco Corp. had an annual average earning growth of 10.4% over the past 10 years. GuruFocus rated Sysco Corp. the business predictability rank of 3.5-star.
This is also a new purchase for Yacktman in 1Q10.
The now-famous Donald Yacktman is seeing money pouring in from new investors. He sticked to his old picks in deploying the new capital. Essentially, their portfolio has made a round trip to that of 2007. The holdings are once again full of Coca-Cola and PepsiCo.
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