The Yacktman Fund (Trades, Portfolio), part of AMG Yacktman Asset Management (Trades, Portfolio), disclosed its third-quarter equity portfolio last week.
Managed by Stephen Yacktman and Jason Subotky, the Austin, Texas-based fund seeks to achieve long-term capital appreciation and current income by combining elements of both growth and value investing strategies. When picking stocks, the portfolio managers focus on good businesses with shareholder-oriented management teams that are trading at a discount.
Keeping these considerations in mind, the NPORT-P filing for the three months ended Sept. 30 shows the fund entered five new positions, sold out of one stock, boosted two investments and trimmed a number of other existing holdings.
On the back of the gains in the energy sector this year, its new holdings were all oil and gas companies: ConocoPhillips (COP, Financial), Devon Energy Corp. (DVN, Financial), EOG Resources Inc. (EOG, Financial), Diamondback Energy Inc. (FANG, Financial) and Pioneer Natural Resources Inc. (PXD, Financial).
Investors should be aware that, just like 13F filings, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, they collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these limited filings can provide valuable information. You can read more about form NPORT-P at the SEC website.
ConocoPhillips
After previously selling out of ConocoPhillips (COP, Financial) in the fourth quarter of 2019, the fund entered an 890,000-share position, allocating 1.45% of the equity portfolio to the investment. The stock traded for an average price of $99.75 per share during the quarter.
The Houston-based oil and gas producer has a $152.31 billion market cap; its shares were trading around $119.65 on Monday with a price-earnings ratio of 9.88, a price-book ratio of 3.03 and a price-sales ratio of 2.41.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
The GF Score of 76 out of 100 indicates the company is likely to have average performance going forward. It received 7 out of 10 ratings for profitability, growth and financial strength, but low ranks of 3 out of 10 for momentum and GF Value.
In addition to adequate interest coverage, the Altman Z-Score of 4.45 indicates ConocoPhillips is in good standing. The return on invested capital overshadows the weighted average cost of capital, meaning value is being created as the company grows. The margins and returns on equity, assets and capital are outperforming versus competitors. It also has a high Piotroski F-Score of 8 out of 9, indicating operations are healthy, and a predictability rank of one out of five stars. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in ConocoPhillips, Dodge & Cox has the largest stake with 1.64% of its outstanding shares. Ken Fisher (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Steven Cohen (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), Elfun Trusts (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates also have significant positions in the stock.
Devon Energy
Yacktman invested in 1.45 million shares of Devon Energy (DVN, Financial), dedicating 1.39% of the equity portfolio to the stake. Shares traded for an average price of $62.13 each during the quarter.
The oil and gas producer, which is headquartered in Oklahoma City, has a market cap of $45.47 billion; its shares were trading around $69.44 on Mondaywith a price-earnings ratio of 8.81, a price-book ratio of 4.51 and a price-sales ratio of 2.67.
According to the GF Value Line, the stock is significantly overvalued currently.
The GF Score of 56, however, indicates it has poor future performance potential based on low ranks for momentum, GF Value and growth. The company received a middling rank of 5 out of 10 for profitability and a high rating of 7 out of 10 for financial strength.
With sufficient interest coverage and a high Altman Z-Score of 4.07, the company appears to be in good standing. The ROIC also eclipses the WACC, so value creation is occurring. In addition, Devon Energy has strong margins and returns, a high Piotroski F-Score of 9 and, despite a decline in revenue per share in recent years, a one-star predictability rank.
With a 0.64% stake, Fisher is Devon Energy’s largest guru shareholder. Other top investors include Cohen, the Yacktman Focused Fund (Trades, Portfolio), Dalio’s firm, Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
EOG Resources
The fund picked up 780,000 shares of EOG Resources (EOG, Financial), giving it 1.39% space in the equity portfolio. During the quarter, the stock traded for an average per-share price of $112.22.
The Houston-based company, which operates in the Permian Basin, Eagle Ford and Bakken plays, has a $71.42 billion market cap; its shares were trading around $121.87 on Monday with a price-earnings ratio of 12.51, a price-book ratio of 3.21 and a price-sales ratio of 2.69.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 84 indicates the company has good outperformance potential, driven by high ratings of 8 out of 10 for profitability, growth and financial strength, a middling rank of 6 for momentum and a low grade of 3 for GF Value.
The company is supported by a comfortable level of interest coverage as well as a high Altman Z-Score of 4.69. While value creation is occurring due to the ROIC exceeding the WACC, its margins and returns are outperforming versus industry peers. EOG also has a high Piotroski F-Score of 7 and a one-star predictability rank.
Nygren is EOG Resources’ largest guru shareholder with a 0.76% stake. PRIMECAP Management (Trades, Portfolio) and the T Rowe Price Equity Income Fund (Trades, Portfolio) also have large holdings.
Diamondback Energy
Yacktman established a 685,000-share holding in Diamondback Energy (FANG, Financial), expanding the equity portfolio by 1.32%. The stock traded for an average price of $124.78 per share during the quarter.
The oil company headquartered in Midland, Texas, which operates exclusively in the Permian Basin of West Texas, has a market cap of $24.83 billion; its shares were trading around $139.85 on Monday with a price-earnings ratio of 6.53, a price-book ratio of 1.82 and a price-sales ratio of 2.75.
The GF Value Line suggests the stock is modestly undervalued currently.
Diamondback is expected to have good outperformance potential based on its GF Score of 88. It raked in high ranks of 8 out of 10 for profitability and growth, a rating of 7 for GF Value and a middling grade of 6 for financial strength.
Although the company has adequate interest coverage, the Altman Z-Score of 2.72 indicates it is under some pressure since assets are building up at a faster rate than revenue is growing. Further, the ROIC outshines the WACC, so value is being created. In addition to strong margins and returns, Diamondback Energy is supported by a high Piotroski F-Score of 9 as well as a one-star predictability rank.
Of the gurus invested in Diamondback, Nygren has the largest stake with 0.80% of its outstanding shares. Fisher, Dalio’s firm, Arnold Van Den Berg (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and several others also own the stock.
Pioneer Natural Resources
The fund purchased 370,000 shares of Pioneer Natural Resources (PXD, Financial), accounting for 1.28% of the equity portfolio. During the quarter, shares traded for an average price of $228.44.
The Irving, Texas-based oil and gas producer has a $58.27 billion market cap; its shares were trading around $244.40 on Monday with a price-earnings ratio of 10.09, a price-book ratio of 2.47 and a price-sales ratio of 2.65.
According to the GF Value Line, the stock is modestly overvalued.
The GF Score of 84 suggests the company has good outperformance potential. It received a 7 out of 10 rating for profitability, an 8 for financial strength, a 9 for growth, a 3 for GF Value and a 6 for momentum.
In addition to a comfortable level of interest coverage, the Altman Z-Score of 4.15 indicates the company is in good standing. Value is also being created since the ROIC is higher than the WACC. It is also supported by strong margins and returns that are outperforming versus competitors, as well as a high Piotroski F-Score of 8 and a one-star predictability rank.
With a 2.17% stake, PRIMECAP Management (Trades, Portfolio) is Pioneer’s largest guru shareholder. Barrow, Hanley, Mewhinney & Strauss also has a large position. Other gurus who own the stock include Van Den Berg, Fisher, Dalio’s firm, Cohen, Stanley Druckenmiller (Trades, Portfolio) and Greenblatt.
Additonal trades and portfolio performance
During the quarter, the fund managers also slimmed the Coca-Cola Co. (KO, Financial) and Sysco Corp. (SYY, Financial) positions, sold out of MSC Industrial Direct Co. Inc. (MSM, Financial) and added to the GrafTech International Ltd. (EAF, Financial) and Embecta Corp. (EMBC, Financial) holdings.
Yacktman’s $6.27 billion equity portfolio, which is composed of 61 stocks, is largely invested in the consumer defensive, communication services, energy and technology sectors.
GuruFocus data shows the fund underperformed the S&P 500 Index in 2021 with a return of 19.63%. The benchmark posted a 28.70% return.
