The Yacktman Focused Fund (Trades, Portfolio) disclosed its fourth-quarter portfolio earlier this week.
Part of Austin, Texas-based Yacktman Asset Management (Trades, Portfolio), the fund is managed by Stephen Yacktman and Jason Subotky. It primarily invests in large-cap U.S. companies to generate long-term capital appreciation and current income. When picking stocks, the portfolio managers look for good businesses that have shareholder-oriented management teams and are trading at low prices.
With these criteria in mind, the firm entered two new positions during the three months ended Dec. 31 and added to or trimmed a number of other existing holdings. The most notable trades for the period included new holdings in Reliance Steel & Aluminum Co. (RS, Financial) and Samsung C&T Corp. (XKRX:028260, Financial), boosts to the Samsung Electronics Co. Ltd. (XKRX:005935, Financial) and Associated British Foods PLC (LSE:ABF, Financial) positions and a reduced bet on Brenntag SE (XTER:BNR, Financial).
Reliance Steel & Aluminum
The fund invested in 310,000 shares of Reliance Steel (RS, Financial), allocating 1.32% of the equity portfolio to the holding. The stock traded for an average price of $154.94 per share during the quarter.
The Los Angeles-based company, which provides metal processing and inventory management services, has a $10.17 billion market cap; its shares were trading around $162.38 on Tuesday with a price-earnings ratio of 9.36, a price-book ratio of 1.74 and a price-sales ratio of 0.86.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past performance and future earnings projections.
GuruFocus rated Reliance Steel’s financial strength 7 out of 10 on the back of adequate interest coverage and a high Altman Z-Score of 5.08, meaning the company is in good standing. The return on invested capital also overshadows the weighted average cost of capital, indicating value is being created as the company grows.
The company’s profitability scored an 8 out of 10 rating, driven by operating margin expansion as well as strong returns on equity, assets and capital that outperform a majority of competitors. Reliance also has a high Piotroski F-Score of 7 out of 9, suggesting business conditions are healthy. Due to consistent earnings and revenue growth, it also has a predictability rank of four out of five stars. According to GuruFocus, companies with this rank return an average of 9.8% annually over a 10-year period.
Of the gurus invested in Reliance Steel, the Yacktman Fund (Trades, Portfolio) has the largest holding with 1.04% of outstanding shares. Chuck Royce (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Jeremy Grantham (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also own the stock.
Samsung C&T
The Focused Fund picked up 364,913 shares of Samsung C&T (XKRX:028260, Financial), dedicating 0.96% of the equity portfolio to the position. Shares traded for an average price of 116,483.87 won ($97.67) each during the quarter.
The South Korean construction and engineering company has a market cap of 16.34 trillion won; its shares closed at 113,000 won on Monday with a price-earnings ratio of 11.25, a price-book ratio of 0.63 and a price-sales ratio of 0.56.
According to the GF Value Line, the stock is fairly valued currently.
Samsung C&T’s financial strength and profitability were both rated 6 out of 10 by GuruFocus. Despite having sufficient interest coverage, the Altman Z-Score of 1.62 warns the company could be in danger of bankruptcy if it does not improve its liquidity. The WACC also eclipses the ROIC, indicating the company struggles to create value.
The company is supported by an expanding operating margin and returns that outperform over half of its industry peers. Samsung C&T also has a high Piotroski F-Score of 7 as well as a one-star predictability rank. GuruFocus says companies with this rank return, on average, 1.1% annually.
With 0.50% of outstanding shares, Steven Romick (Trades, Portfolio) is Samsung C&T’s largest guru shareholder. Other top guru investors are the Yacktman Fund (Trades, Portfolio), Francisco Garcia Parames (Trades, Portfolio) and the iShares MSCI ACWI ex. U.S. ETF.
Samsung Electronics
Impacting the equity portfolio by 0.94%, the fund upped its Samsung Electronics (XKRX:005935, Financial) stake by 9.02%, buying 600,000 shares. During the quarter, the stock traded for an average per-share price of 67,454.8 won.
The fund now holds 7.25 million shares, representing 11.38% of the equity portfolio and is its largest holding. GuruFocus data shows it has gained an estimated 92.27% on the long-held investment.
The Korean electronics manufacturer has a market cap of 521.82 trillion won; its shares closed at 71,900 won on Tuesday with a price-earnings ratio of 15.02, a price-book ratio of 1.83 and a price-sales ratio of 1.8.
Based on the GF Value Line, the stock appears to be fairly valued currently.
Samsung’s financial strength and profitability were both rated 8 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the robust Altman Z-Score of 5.14 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also exceeds the WACC, indicating good value creation is occurring.
The company is also being supported by an expanding operating margin, strong returns that outperform over half of its competitors and a high Piotroski F-Score of 8. On the back of steady earnings and revenue growth, Samsung also has a 3.5-star predictability rank. GuruFocus data shows companies with this rank return 9.3% on average annually.
The Yacktman Fund (Trades, Portfolio) has the largest stake in Samsung Electronics with 0.16% of its outstanding shares. The iShares MSCI ACWI ex. U.S. ETF also has a position.
Associated British Foods
With an impact of 0.57% on the equity portfolio, the Focused Fund increased its Associated British Foods (LSE:ABF, Financial) position by 15.69%, buying 800,000 shares. During the quarter, the stock traded for an average price of 18.97 pounds ($25.78) per share.
The fund now holds 5.9 million shares total, which account for 4.24% of the equity portfolio and is its sixth-largest holding. GuruFocus estimates it has gained 1.48% on the investment since establishing it in the fourth quarter of 2019.
The British food processing company has a market cap of 16.81 billion pounds; its shares closed at 21.23 pounds on Monday with a price-earnings ratio of 35.09, a price-book ratio of 1.69 and a price-sales ratio of 1.2.
The GF Value Line suggests the stock is fairly valued currently.
GuruFocus rated Associated British Foods’ financial strength 6 out of 10. Although the company has insufficient interest coverage, the Altman Z-Score of 3.46 indicates it is in good standing. The WACC surpasses the ROIC, however, so the company struggles to create value.
The company’s profitability fared a bit better with a 7 out of 10 rating. In addition to a declining operating margin, Associated British Foods’ returns underperform over half of its industry peers. It also has a high Piotroski F-Score of 7, but the one-star predictability rank is on watch as a result of recording declining revenue per share in the past five years.
The Yacktman Fund (Trades, Portfolio) has the largest position in Associated British Foods, holding 0.99% of its outstanding shares. The iShares MSCI ACWI ex U.S. ETF (Trades, Portfolio) also owns the stock.
Brenntag
Impacting the equity portfolio by -0.92%, the fund trimmed its Brenntag (XTER:BNR, Financial) stake by 21.21%, divesting of 350,000 shares. During the quarter, shares traded for an average price of 79.58 euros ($90.18) each.
The Focused Fund now holds 1.3 million shares total, which make up 3.08% of the equity portfolio. It is also the fund’s 10th-largest holding. GuruFocus data shows the fund has gained an estimated 83.78% on the investment since the first quarter of2019.
The German chemical company has a market cap of 12.26 billion euros; its shares closed at 79.36 euros on Monday with a price-earnings ratio of 24.58, a price-book ratio of 3.22 and a price-sales ratio of 0.94.
According to the GF Value Line, the stock is significantly overvalued currently.
GuruFocus rated Brenntag’s financial strength 6 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 3.41. The ROIC has also risen above the WACC, so value is being created.
The company’s profitability scored an 8 out of 10 rating. Although the operating margin is in decline, Brenntag’s returns outperform over half of its competitors. Consistent earnings and revenue growth contributed to a 4.5-star predictability rank. Based on GuruFocus data, companies with this rank return an annual average of 10.6%.
The Yacktman Fund (Trades, Portfolio) has the largest stake in Brenntag with 1.78% of its outstanding shares. The iShares MSCI ACWI ex. U.S. ETF also has a position in the stock.
Additional trades and portfolio performance
During the quarter, the Focused Fund also added to its holdings of Huyndai Motor Co. (XKRX:005385, Financial) and Yuasa Trading Co. Ltd. (TSE:8074, Financial) as well as reduced its positions in The Walt Disney Co. (DIS, Financial), Sysco Corp. (SYY, Financial) and Macy’s Inc. (M, Financial).
The fund’s $3.81 billion equity portfolio, which is composed of 53 stocks, is largely invested in the consumer defensive, technology and communication services sectors.
The Focused Fund returned 16.45% in 2021, slightly underperforming the S&P 500’s 28.71% return.
