GuruFocus is interviewing investing guru Donald Yacktman, co-CIO of the $6.3 billion Yacktman Funds, in February, and will be asking readers’ questions. To ask a question, enter it in the comments section below. Donald Yacktman had another remarkable performance in a volatile market. For 2011, while the S&P returned 2.1% and the average diversified U.S. stock fund returned -2.9%, the Yacktman Focused Fund and the Yacktman Fund returned 7.4% and 7.3%. In the last five years alone his cumulative return is 47.2%, compared to -3.1% for the S&P 500. He has also beaten 99% of his peers in the last three, five, ten and fifteen-year periods.
Portfolio Positions
The disciplined investors at Yacktman Funds have stuck with the world’s highest quality businesses, most of which offer products or services integral to society. Their top holdings are PepsiCo (PEP), News Corp Cl. A (NWS, Financial), Procter & Gamble (PG, Financial), Microsoft (MSFT, Financial), C.R. Bard (BCR, Financial), Cisco Systems (CSCO, Financial), Sysco Corporation (SYY, Financial), Coca-Cola (KO, Financial), Pfizer (PFE, Financial) and U.S. Bancorp (USB, Financial).
“I’ve been doing this for over forty years, and I can’t remember another period of time where I’ve seen so many high quality, profitable businesses selling at prices relative to the market this cheaply,” Yacktman said in an interview recently.
In the fourth quarter, Yacktman’s biggest additions to his holdings were Research In Motion (RIMM, Financial) and Avon Products (AVP, Financial). He also surprised followers by venturing into financials, with new positions in Goldman Sachs (GS), Bank of America (BAC), State Street Corp. (STT) and Northern Trust Corp. (NTRS).
How He Does It
Businesses that Yacktman likes will have:
· High market share in principal product and/or service lines
· A high cash return on tangible assets
· Relatively low capital requirements allowing a business to generate cash while growing
· Short customer repurchase cycles and long product cycles
· Unique franchise characteristics
The price must also be less than what an investor would pay to buy the whole company, and they will wait for the lowest possible price to buy a stock. The company describes their approach as “objective, diligent and patient.”
A side note about Donald Yacktman is that he was often criticized for his contrarian moves during the tech bubble. While many other managers were going headlong into Internet stocks, he positioned his portfolio in undervalued small caps, believing that Internet companies were dangerously overvalued. When the bubble burst, he was proved right. His fund then had a streak of beating the market from 2000-2002, while the S&P 500 produced negative returns.
About Yacktman
Yacktman founded Yacktman Asset Management Co. in 1992, after serving for 10 years as senior portfolio manager of the Selected American Shares mutual fund, and was named Portfolio Manager of the Year by Morningstar in 1991. From 1968 to 1982, he was a portfolio manager with Stein Roe & Farnham. He holds a B.S. magna cum laude in economics from the University of Utah and an MBA with distinction from Harvard University.
Asking a Question
GuruFocus will speak with Donald Yacktman this month and ask him our readers’ questions. To ask your questions, enter it in the comments section below.
See Yacktman’s complete portfolio here, and also check out his Undervalued Stocks, Top Growth Companies and High Yield stocks.
Portfolio Positions
The disciplined investors at Yacktman Funds have stuck with the world’s highest quality businesses, most of which offer products or services integral to society. Their top holdings are PepsiCo (PEP), News Corp Cl. A (NWS, Financial), Procter & Gamble (PG, Financial), Microsoft (MSFT, Financial), C.R. Bard (BCR, Financial), Cisco Systems (CSCO, Financial), Sysco Corporation (SYY, Financial), Coca-Cola (KO, Financial), Pfizer (PFE, Financial) and U.S. Bancorp (USB, Financial).
“I’ve been doing this for over forty years, and I can’t remember another period of time where I’ve seen so many high quality, profitable businesses selling at prices relative to the market this cheaply,” Yacktman said in an interview recently.
In the fourth quarter, Yacktman’s biggest additions to his holdings were Research In Motion (RIMM, Financial) and Avon Products (AVP, Financial). He also surprised followers by venturing into financials, with new positions in Goldman Sachs (GS), Bank of America (BAC), State Street Corp. (STT) and Northern Trust Corp. (NTRS).
How He Does It
Businesses that Yacktman likes will have:
· High market share in principal product and/or service lines
· A high cash return on tangible assets
· Relatively low capital requirements allowing a business to generate cash while growing
· Short customer repurchase cycles and long product cycles
· Unique franchise characteristics
The price must also be less than what an investor would pay to buy the whole company, and they will wait for the lowest possible price to buy a stock. The company describes their approach as “objective, diligent and patient.”
A side note about Donald Yacktman is that he was often criticized for his contrarian moves during the tech bubble. While many other managers were going headlong into Internet stocks, he positioned his portfolio in undervalued small caps, believing that Internet companies were dangerously overvalued. When the bubble burst, he was proved right. His fund then had a streak of beating the market from 2000-2002, while the S&P 500 produced negative returns.
About Yacktman
Yacktman founded Yacktman Asset Management Co. in 1992, after serving for 10 years as senior portfolio manager of the Selected American Shares mutual fund, and was named Portfolio Manager of the Year by Morningstar in 1991. From 1968 to 1982, he was a portfolio manager with Stein Roe & Farnham. He holds a B.S. magna cum laude in economics from the University of Utah and an MBA with distinction from Harvard University.
Asking a Question
GuruFocus will speak with Donald Yacktman this month and ask him our readers’ questions. To ask your questions, enter it in the comments section below.
See Yacktman’s complete portfolio here, and also check out his Undervalued Stocks, Top Growth Companies and High Yield stocks.
