When others flee the market, you can probably find Don Yacktman going the other way. He’ll be in the rubble, sifting for large, cash-generative stocks. His nose for a beaten-up stock poised to rebound has served him well. Particularly so in the past four years.
Yacktman put a mound of cash to work and bought names like News Corp., Comcast and Wal-Mart. Blue chips firms that sold cheaply. “My son once said, Dad, let me see if I got it right: You buy above-average businesses at below average prices and, on average, it’s going to work?” Yacktman recalled recently. “I said: Yes, that’s simplified, but it’s basically the process.”
Manager of two eponymous funds, Yacktman’s concentrated portfolios—with precious little turnover—can mean trouble in boom periods. Yacktman badly underperformed the market in the years leading up the dot com bubble, then again prior to the financial crisis. Shareholders fled. In 2007, the Yacktman Fund (YACKX; expenses 0.8%) had only $293 million in assets; the Yacktman Focused Fund (YAFFX; expenses 1.3%) had $67 million.
Fast forward to today. Assets in the two funds are up 8,200% (to $6.8 billion) and 9,700% (to $6.5 billion), respectively. Wild growth backed by five-year total returns of 15.7% and 23.6%, as the S&P 500 dropped 4.6%. Shareholders are back, and they’ve brought friends. It’s an especially dizzying amount when you consider that most asset managers struggle today to record net inflows—not to mention that 2012 was a period in which tens of billions flooded from equity funds into bond funds. (Yacktman was one of the bright investing minds that FORBES polled this year to help better position your portfolio for 2013, in the second act of the Obama Years.)
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Yacktman put a mound of cash to work and bought names like News Corp., Comcast and Wal-Mart. Blue chips firms that sold cheaply. “My son once said, Dad, let me see if I got it right: You buy above-average businesses at below average prices and, on average, it’s going to work?” Yacktman recalled recently. “I said: Yes, that’s simplified, but it’s basically the process.”
Manager of two eponymous funds, Yacktman’s concentrated portfolios—with precious little turnover—can mean trouble in boom periods. Yacktman badly underperformed the market in the years leading up the dot com bubble, then again prior to the financial crisis. Shareholders fled. In 2007, the Yacktman Fund (YACKX; expenses 0.8%) had only $293 million in assets; the Yacktman Focused Fund (YAFFX; expenses 1.3%) had $67 million.
Fast forward to today. Assets in the two funds are up 8,200% (to $6.8 billion) and 9,700% (to $6.5 billion), respectively. Wild growth backed by five-year total returns of 15.7% and 23.6%, as the S&P 500 dropped 4.6%. Shareholders are back, and they’ve brought friends. It’s an especially dizzying amount when you consider that most asset managers struggle today to record net inflows—not to mention that 2012 was a period in which tens of billions flooded from equity funds into bond funds. (Yacktman was one of the bright investing minds that FORBES polled this year to help better position your portfolio for 2013, in the second act of the Obama Years.)
Continue reading.
