The Yacktman Fund (Trades, Portfolio) has revealed its portfolio for the third quarter of 2021. Major trades include additions to the fund’s Canadian Natural Resources Ltd. (CNQ, Financial), Cognizant Technology Solutions Corp. (CTSH, Financial) and Amerco Inc. (UHAL, Financial) holdings, a new buy into Weatherford International PLC (WFRD, Financial) and selling out of its ConocoPhillips (COP, Financial) position.
Yacktman employs a disciplined investment strategy, buying growth companies at what it believes to be low prices. The firm believes this approach combines the best features of "growth" and "value" investing. When purchasing stocks, it generally searches for companies it believes to possess one or more of the following three attributes: be a good business, have shareholder-orientated management and a low purchase price.
Portfolio overview
At the end of the quarter, the fund’s portfolio contained 55 stocks with two new holdings in ConocoPhillips and Vitesco Technologies Group AG (FRA:VTSC, Financial). It was valued at $7.53 billion and has seen a turnover rate of 4%. Top holdings include Samsung Electronics Co. Ltd. (XKRX:005935, Financial), Bollore SA (XPAR:BOL, Financial), Alphabet Inc. (GOOG, Financial), Canadian Natural Resources and Brenntag SE (XTER:BNR, Financial).
The top represented sectors in the portfolio are communication services (20.85%), consumer defensive (20.65%) and technology (17.74%).
Canadian Natural Resources
The fund’s fresh-faced Canadian Natural Resources (CNQ, Financial) holding got a boost for the second quarter in a row after its purchase at the beginning of 2020. The purchase of 2.11 million shares boosted the holding by 30.19%. The shares traded at an average price of $33.69 during the quarter. Overall, the sale had a 1.02% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 37.03%.
Canadian Natural Resources is one of the largest oil and natural gas producers in western Canada, supplemented by operations in the North Sea and offshore Africa. The company's portfolio includes light and medium oil, heavy oil, bitumen, synthetic oil, natural gas liquids and natural gas. Production averaged 1.16 million barrels of oil equivalent per day in 2020, and the company estimates that it holds over 11.5 billion boe of proven and probable crude oil and natural gas reserves.
On Oct. 21, the stock was trading at $42.23 per share with a market cap of $49.74 billion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 5 out of 10. There is currently one severe warning sign listed for declining revenue per share. The company’s return on invested capital has continuously been overshadowed by the weighted average cost of capital, indicating capital efficiency issues.
Other top guru shareholders of Canadian Natural Resources (CNQ, Financial) include Yacktman Asset Management (Trades, Portfolio), the Yacktman Focused Fund (Trades, Portfolio), Pioneer Investments, Steven Cohen (Trades, Portfolio) and Azvalor Internacional FI (Trades, Portfolio).
Weatherford International
A new buy was established into Weatherford International during the quarter. Managers purchased 3.9 million shares that traded at an average price of $16.65 during the three-month period. The fund has quickly achieved a total estimated gain of 65.83% on the holding and the purchase had a 1.02% impact on the equity portfolio overall.
Weatherford International provides a diversified portfolio of oilfield services, with offerings catering to all geographies and different types of oil fields. Key product lines include artificial lift, tubular running services, cementing products, directional drilling and wireline evaluation.
As of Oct. 21, the stock was trading at $27.62 per share with a market cap of $1.93 billion. The GF Value Line shows the stock trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 4 out of 10. There are currently six severe warning signs issued for the company, including poor financial strength and new long-term debt. The company’s cash-to-debt ratio of 0.43 ranks worse than 51.62% of industry competitors.
Yacktman Asset Management (Trades, Portfolio) and the Yacktman Focused Fund (Trades, Portfolio) also own shares of Weatherford International (WFRD, Financial).
Cognizant
Managers of the fund also boosted its Cognizant (CTSH, Financial) position. The position jumped by 34.19% with the purchase of 786,362 shares. The shares traded at an average price of $73.76 throughout the quarter. GuruFocus estimates the total gain of the holding at 20.45% throughout the last four years and the addition had a 0.77% impact on the equity portfolio.
Cognizant is a global IT services provider, offering consulting and outsourcing services to some of the world's largest enterprises spanning the financial services, media and communications, health care, natural resources, and consumer products industries. Cognizant employs nearly 300,000 people globally, roughly 70% of whom are in India, although the company's headquarters are in Teaneck, New Jersey.
The stock was trading at $78.79 per share with a market cap of $41.64 billion on Oct. 21. According to the GF Value Line, the stock is fairly valued.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 9 out of 10. There are currently three severe warning signs issued for assets growing faster than revenue, a declining gross margin and a declining operating margin. Despite the severe warning sign, the company’s operating margin of 14.48% exceeds 78.89% of software companies.
Cognizant (CTSH, Financial) shares are also held by Dodge & Cox, Richard Pzena (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Diamond Hill Capital (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio).
Amerco
The fund’s relatively new Amerco (UHAL, Financial) holding also got a boost during the third quarter. The addition of 68,764 shares boosted the holding by 95.11% and the shares traded at an average price of 626.93 during the quarter. Overall, the purchase had a 0.59% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 19.35% over the last two quarters.
Amerco is a provider of rental trucks to household movers. The company operates a fleet of trucks, trailers and towing devices under the U-Haul brand. The service is targeted at do-it-yourself household movers. Amerco offers its products and services through a network of retail moving stores and independent U-Haul dealers. The company also offers self-storage solutions for household and commercial goods, as well as insurance products covering loss on goods in storage, medical, life and cargo protection. It operates in three segments: Moving and Storage, Property and Casualty Insurance and Life Insurance.
On Oct. 21, the stock was trading at $725.02 per share with a market cap of $14.20 billion. The stock is trading at a significantly overvalued rating as seen on the GF Value Line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 3 out of 10. There are currently two severe warning signs issued for assets growing faster than revenue and a declining operating margin. Free cash flow was increasingly negative through 2020 before making a quick flip into the green this year.
David Abrams (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Hotchkis & Wiley, Robert Bruce (Trades, Portfolio) and the Smead Value Fund (Trades, Portfolio) also own shares of Amerco (UHAL, Financial).
ConocoPhillips
After a half-decade of reductions, the fund sold out of its ConocoPhillips (COP, Financial) holding. The remaining 650,000 shares were sold throughout the quarter at an average price of $57.76. The sale had a -0.53% impact on the equity portfolio and GuruFocus estimates the fund gained 36.78% on the holding.
ConocoPhillips is a U.S.-based independent exploration and production company. At the end of 2020, it produced 727,000 barrels per day of oil and natural gas liquids and 2.4 billion cubic feet per day of natural gas. The resources came primarily from the United States and Norway, alongside several countries in the Asia-Pacific and Middle East regions. Proven reserves at year-end 2020 were 4.5 billion barrels of oil equivalent.
As of Oct. 21, the stock was trading at $74.71 per share with a market cap of 100.04 billion. The GF Value Line shows the stock trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently two severe warning signs issued for a Beneish M-Score indicating the company may manipulate its financials and declining revenue per share. The company’s revenue and net income were making a recovery after a low in 2016, but fell back off in 2020 amidst decreased demand due to the pandemic.
Other top gurus with positions in ConocoPhillips (COP, Financial) include Dodge & Cox, Ken Fisher (Trades, Portfolio), Pioneer Investments, Bill Nygren (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio).
