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The Science of Hitting
The Science of Hitting
Articles (437) 

Donald Yacktman - "Wouldn't Be Surprised" to See PepsiCo up 150% over 10 Years

February 09, 2012 | About:
Donald Yacktman, who runs the Yacktman Funds, has a stellar track record; in the past three, five, ten, and fifteen-year periods, the fund has beat more than 99% of its peers. To me, that says one thing: This is someone worth listening to.

On Thursday, Mr. Yacktman appeared on CNBC to talk about one of his top holdings, PepsiCo (NYSE:PEP). The company reported fourth-quarter results Thursday morning, made a few big announcements, including that they would cut 8,700 globally and increase marketing by $500-$600 million in 2012. Here are some of the highlights from his commentary:

On the drop in price today – “A long-term investor will be happy to see the opportunity to buy a great business at a lower price.”

Why the Yacktman Funds likes PEP – “We buy companies based on very long-term horizon times; we buy risk adjusted forward rates of return… this company has a great business model.”

Long term potential – “I wouldn't be surprised to see between the dividends and the price appreciation to make 150% over ten years."

At the price of roughly $64, that 150% is good for an annualized return of 9.6% per annum; if the price were to hit $60 a share, the return under the same 10-year price assumption would jump to 10.3% per annum.

About the author:

The Science of Hitting
I'm a value investor with a long-term focus. As it relates to portfolio construction, my goal is to make a small number of meaningful decisions a year. In the words of Charlie Munger, my preferred approach to investing is "patience followed by pretty aggressive conduct." I run a concentrated portfolio, with a handful of equities accounting for the majority of its value. In the eyes of a businessman, I believe this is sufficient diversification.

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