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Charles Cliff
Charles Cliff

Donald Yacktman Top 5 Holdings: NWS, PEP, KO, MSFT, PG

February 24, 2011 | About:
Donald Yacktman is the President and Co-Chief Investment Officer of Yacktman Asset Management Co, and a Co-Manager for The Yacktman Funds. He graduated Magna Cum Laude with a B.S. in economics from The University of Utah and an MBA with distinction from Harvard University. After graduation, Yacktman joined Stein Roe & Farnham as a portfolio manager in 1968. In 1982, he joined Selected Financial Services, Inc. Yacktman served for ten years as the Senior Portfolio Manager of Selected Financial Services, Inc.; at the same time, he also served for nine years as the Portfolio Manager of the Selected American Shares mutual fund and was named Portfolio Manager of The Year by Morningstar in 1991. In 1992, Yacktman left Selected Financial to found his own investment firm.

Yacktman Asset Management Co. is an investment advisory firm that serves long-term oriented investors. The organization is entirely internally owned and is investment adviser to the Yacktman Fund and Yacktman Focused Fund as well as separate accounts for taxable and tax-exempt organizations. In 2010, the Yacktman Focused Fund has averaged 11.84% returns and the Yacktman Fund has averaged 12.64% returns. Over the last ten years, the Yacktman Focused Fund has averaged 12.18% 10 year returns and the Yacktman Fund has averaged 11.76% 10 year returns.

Yacktman focuses on long term returns, rather than emphasizing short-term success. During these last years of economic crisis, Yacktman has focuses on playing his long-term gam: “We have seen several “Fed‐induced” rallies since our firm was founded in 1992, and have generally underperformed somewhat during those periods on our way to outperforming over the long term.” Yacktman relies on reliable stocks, performing with constant levels of growth: “Recently differential in return opportunities has narrowed between what Yacktman defines as high quality and low quality; he has shifted more of the portfolios toward Blue Chip companies”. According to his most recent assessment, Yacktman thinks that the “best investment ideas lie in the high quality stocks”, which explains his recent investment direction of large companies.

Yacktman’s performance compared to competitors is discussed in our study of Which Gurus Had Positive Returns From 2008 To 2010?. Among all mutual fund gurus tracked by GuruFocus, Donald Yacktman had the highest return. His three year cumulative return was 32%. Donald Yacktman had a smaller loss in 2008, but he sees the opportunity in the market, and quickly bought into beaten down small caps and made an impressive gain of almost 60%. He underperformed slightly in 2010.


Top Five Holdings in 2010 Ticker Percent Composition Number of Shares
News Corp NWS 11.26 46,077,391.00
Pepsico Inc. PEP 10.32 9,414,702.00
CocaCola Company KO 7.52 6,819,066.00
Microsoft Corp. MSFT 6.05 12,912,046.00
Procter & Gamble Company PG 5.48 5,078,060.00

News Corp. (NYSE: NWS)

News Corporation is a global media company, operating in eight segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Integrated Marketing Services, Newspapers and Information Services, Book Publishing, and Others. The Company’s conducts activities in the United States, the United Kingdom, Continental Europe, Australia, Asia and Latin America.

Their shares trade around $16.60, with a P/E ratio of 13.96 and an EPS of $1.19. In the last quarter of 2010, News Corp. had revenue of $8.7 billion and a net income of $642 million. News Corp. is currently Yacktman’s largest holding, and one Yacktman thinks “offers enormous upside”. Although not meeting initial expectations, “despite a major recession, the operating income of … [News Corp]… more than doubled, and since 2000, pre‐tax profits have increased nearly 30‐fold”. News Corp embodies Yacktman’s long-term philosophy, returning large profits over the course of several years, rather than short-term, unstable benefits. Gurufocus rated NWS with the business predictability rank of 1-star.

Pepsico Inc. (NYSE: PEP)

PepsiCo, Inc. is a snack and beverage company that produces oat, rice and grain-based snacks, as well as carbonated and non-carbonated beverages, in over 200 countries. It primarily operates in North America and the United Kingdom. It is organized into three business units: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), and PepsiCo International (PI).

Their shares trade around $63.00, with a P/E ratio of 16.1 and an EPS of $3.91.In the last quarter of 2010, Pepsico had revenue of $18 billion and a net income of $1.3 billion.Gurufocus rated PEP with the business predictability rank of 4-stars.

CocaCola (NYSE: KO)

The Coca-Cola Company is the owner and marketer of nonalcoholic beverage brands. It also manufactures, distributes and markets concentrates and syrups used to produce nonalcoholic beverages. The Company owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages, such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks.

Their shares trade around $64.00, with a P/E ratio of 12.68 and an EPS of $5.05.In the last quarter of 2010, CocaCola had revenue of $10.4 billion and a net income of $5.7 billion.Gurufocus rated KO with the business predictability rank of 3.5-stars.

Pepsico and CocaCola are Yacktman’s second and third largest holdings respectively. Both companies have exhibited constant growth over the past ten-years, and now “both companies are well positioned for long‐term global growth.” Pepsico already has a predominantly large market-share in most snack-food and beverage markets: “We like to say that if you can buy it from a vending machine, we want to own it.” Yacktman sees that CocaCola is well-positioned for future growth: “Coke has high market share in many of the top emerging markets, which we think will allow the company to grow volume at an attractive rate for decades to come.”

Microsoft (NYSE: MSFT)

Microsoft Corporation is engaged in developing, manufacturing, licensing and supporting a range of software products and services for different types of computing devices. Its software products and services include operating systems, server applications, information worker productivity applications, business solutions applications, computing applications, software development tools, and video games. It also designs and sells hardware, including the Xbox 360 gaming and entertainment console and accessories, the Zune digital music and entertainment device and accessories, and Microsoft personal computer (PC) hardware products.

Their shares trade around $26.68, with a P/E ratio of 11.31 and an EPS of $2.36.In the last quarter of 2010, Microsoft had revenue of $19.53 billion and a net income of $6.63 billion.

Microsoft has recovered well in these turbulent economic years. It is well-positioned as a leading technology contender to outperform expectations in the coming years: “We believe Microsoft has solid growth ahead and its shares are extremely inexpensive.” Microsoft is a safe, solid investment that Yacktman relies on as his primary technology holding. Gurufocus rated MSFT with the business predictability rank of 3-stars.

Procter & Gamble (NYSE: PG)

The Procter & Gamble Company (P&G) is focused on providing consumer packaged goods. The Company’s products are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores, the neighborhood stores, which serve many consumers in developing markets. It has on-the-ground operations in approximately 80 countries.

Their shares trade around $64.16, with a P/E ratio of 17.46 and an EPS of $3.67.In the last quarter of 2010, Procter & Gamble had revenue of $21.3 billion and a net income of $3.3 billion. Yacktman “has a fondness for consumer stocks that people will likely continue to buy in good times and bad” and Procter & Gamble fits into this mold perfectly (New York Post). Because of its strong market presence, name recognition, and consumer popularity, Procter & Gamble serves Yacktman as a reliable cornerstone for his portfolio. Gurufocus rated PG with the business predictability rank of 3.5-stars.

To check the complete list of Top Holdings of Donald Yacktman, please go to: http://www.gurufocus.com/holdings.php?GuruName=Donald+Yacktman&tab=top

Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Donald Yacktman.

Rating: 3.0/5 (4 votes)


Halis - 6 years ago    Report SPAM
NWS, PEP, KO, MSFT, and PG hmmmm......

BORING, BORING, BORING, sorta interesting and sorta interesting.

All great companies, but a great company does not a good stock make me thinks....
Halis - 6 years ago    Report SPAM
You know what, I take it back...

News Corp is just flat out crazy IMB a small margin of safety, low long-term return, somewhat muddled prospects as they are traditional media.....

Pepsi and Coke might outperform the market by a little if the market performs near its historic average, but what's so compelling about that?

Now Microsoft and P&G are interesting because I think they're at about fair value and they both have awesome long-term returns, but the reason I'm skeptical is their huge market caps. The problem I have with them is the same reason bacteria don't multiply without end and consume every atom of matter in the universe. Have you ever heard that saying, "Trees don't grow to the sky?"
Cm1750 - 6 years ago    Report SPAM

Yacktman is looking at risk-adjusted returns. Most of those stocks should return 7-12% IRR over a multi-year time period with pretty high certainty.

In the past, Yacktman has held quality stocks if the relative valuation is attractive and then moves into "lower quality" stocks when opportunities present themselves, like in 2008-09. That provides a lot of flexibility.

GMO's latest 7-year U.S. market forecast projects 2.5% nominal IRR for large caps and 0.5% for small caps while "quality" stocks should be 7%. If that's right, 5% low-risk alpha is darn good. Opportunistically selling OTM calls and puts could add a few additional percent.

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GuruFocus has detected 2 Warning Signs with News Corp $NWS.
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