Donald Yacktman and Warren Buffett are two investors whose styles overlap and who have both earned high returns investing in sound companies for the long term. Yacktman quips that he is a “dumpster diver” who seeks to buy stocks at rock-bottom prices and valuations. His team at Yacktman Asset Management is also concerned with what he calls forward rate of return. Buffett calls his style a mix of Benjamin Graham and Phil Fisher, and has said, "We want businesses to be ones (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price."
The two men own nine stocks in common. These are the largest: Wells Fargo (WFC, Financial), Coca-Cola (KO, Financial), Procter & Gamble (PG, Financial), Wal-Mart (WMT, Financial) and U.S. Bancshares (USB, Financial).
Wells Fargo (WFC)
Warren Buffett owns 458,170,323 shares of WFC, valued as $16.95 billion as of March 31, 2013, which accounts for 19.9% of his equity portfolio. Donald Yacktman owns 19,200 shares of WFC, valued as $1 million as of March 31, 2013, which accounts for 0.0036% of his equity portfolio.
Wells Fargo & Co. is a corporation organized under the laws of Delaware and a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Wells Fargo has a market cap of $214.02 billion; its shares were traded at around $40.23 with a P/E ratio of 11.40 and P/S ratio of 2.50. The dividend yield of Wells Fargo stocks is 2.40%. Wells Fargo had an annual average earnings growth of 1.6% over the past 10 years.
While Wells Fargo is one of Buffett’s favorite companies, it is Yacktman’s smallest position. It is a mere 0.0036% of his portfolio, even after adding 13,200 shares in the first quarter. The price has gone up 29% from his average purchase price since then.
In the first quarter, Warren Buffett added to his stake for the 13th quarter since 2009:
Wells Fargo’s price, revenue, earnings and P/E history has unfolded in the following manner:
The company also has a forward rate of return of 30.35, higher than 92% of the companies in the U.S. global banks industry, but slightly over the midpoint of the company’s historical range.
According to the Peter Lynch chart, the company is undervalued:
In his 2013 annual shareholder meeting, Buffett said of Wells Fargo and banking in general: “Capital ratios for long banks are at high levels and affects return on equity. Capital ratios increase and return on equity will increase. Banking in the U.S. is stronger than in the past 20 years. Compared to the EU or 20 years ago, it’s dramatically stronger. Don’t worry about banking being the cause of the next bubble. Usually we don’t get to a bubble the same way we got to the last one. I feel good about our investments at MNT and WFC. We won’t earn as much return on equity because the rules change.”
In the first quarter Wells reported record net income, slightly lower revenue, continued loan and deposit growth and a dividend increase to $0.25 quarterly – more than doubling it from the first quarter of 2012 and bringing it nearer its pre-recession level.
Coca-Cola Co. (KO)
Warren Buffett owns 400,000,000 shares of KO, valued as $16.18 billion as of March 31, 2013, which accounts for 19% of his equity portfolio. Donald Yacktman owns 22,889,752 shares of KO, valued as $926 million as of March 31, 2013, which accounts for 4.7% of his equity portfolio.
Yacktman made a huge buy of Coke shares in the first quarter, increasing his stake from 16,584,021 shares to 45,779,504. The increase raised it to his seventh largest position.
Buffett, on the other hand, has sat on his position since he acquired it years ago. It is his second largest position.
The Coca-Cola Co. was incorporated in September 1919 under the laws of the State of Delaware. Coca-Cola has a market cap of $178.01 billion; its shares were traded at around $39.46 with a P/E ratio of 20.80 and P/S ratio of 3.80. The dividend yield of Coca-Cola stock is 2.70%. Coca-cola had an annual average earnings growth of 9.3% over the past 10 years. GuruFocus rated Coca-Cola the business predictability rank of 5-star.
The Peter Lynch chart says Coke is now overvalued:
In the first quarter, Coke’s revenue declined 1%, and EPS declined 13%, year over year. Worldwide volume growth was 4%, with Coca-Cola Americas growing 3% and Coca-Cola international at 5%.
Yacktman commented on the company at the annual Value Investors Conference in May:
“Our central tendency is to have businesses with low cyclicality, Coke (KO) and Pepsi (PEP).
Coke had its all time high at 44 and a half, still hasn’t reached that. Was a good business then and is today. But it was just overpriced. Fast forward and you start to see it at a much better letter. By 2007 we had over 10 percent of the fund in Coca-Cola, much less now as price went up.”
Procter & Gamble (PG)
Warren Buffett owns 52,793,078 shares of PG, valued as $4.07 billion as of March 31, 2013, which accounts for 4.8% of his equity portfolio. Donald Yacktman owns 26,537,423 shares of PG, valued as $2.05 billion as of March 31, 2013, which accounts for 10.5% of his equity portfolio.
Yacktman also just about doubled his share of PG in the first quarter, increasing his stake from 27,752,099 shares to 53,074,846. It thus became his second largest holding, behind News Corp. (NWSA).
Buffett has been made reductions to his Procter & Gamble holding during eight quarters since the fourth quarter of 2008.
Procter & Gamble Co. was incorporated in Ohio in 1905, having been built from a business founded in 1837. Procter & Gamble has a market cap of $211.94 billion; its shares were traded at around $75.93 with a P/E ratio of 19.20 and P/S ratio of 2.70. The dividend yield of Procter & Gamble stocks is 3.00%. Procter & Gamble had an annual average earnings growth of 5.9% over the past 10 years. GuruFocus rated Procter & Gamble the business predictability rank of 2-star.
Yacktman also commented on PG in his first quarter letter:
“Consumer staples performed well with Procter & Gamble (PG) and PepsiCo, Inc. (PEP) being the top contributors to results for the Funds. Both companies struggled last year as they worked through business challenges that produced what we think were below normal profit margins. Last quarter both companies reported results showing margin improvement and the shares rebounded. We like holding positions in companies where we believe profit margins can improve in coming years, a period when we think the general market will see profit margins decline.”
PG also has a 10-year forward rate of return of 2.45%, which is higher than 84% of companies in the global household & personal products industry, though at the low range of the company’s historical range.
The Peter Lynch chart indicates the company is currently overvalued:
In the first quarter, PG reported a 12% increase in core earnings per share and a 2% net sales increase year over year. The company held or grew market share in its businesses that held 50% of sales in the quarter. The results landed in the high end of the company’s expectations for revenue and surpassed the forecast for EPS, operating profit and cash flow.
Buffett began buying Wal-Mart in 2009 and has added shares in four quarters since then. It is his sixth largest holding.
Yacktman also began buying Walmart in the third quarter of 2009 and has traded it numerous times since, making his largest purchase, 3.24 million shares, in the first quarter of 2013.
Wal-Mart Stores Inc. was incorporated in Delaware in October 1969. Wal-mart Stores has a market cap of $245.04 billion; its shares were traded at around $73.53 with a P/E ratio of 14.60 and P/S ratio of 0.50. The dividend yield of Wal-mart Stores stocks is 2.30%. Wal-mart Stores had an annual average earnings growth of 10.3% over the past 10 years. GuruFocus rated Wal-mart Stores the business predictability rank of 5-star.
Wal-Mart has a forward rate of return of 11.85, higher than 90% of the companies in the global discount stores industry and slightly over the mid range for the company’s history.
The Peter Lynch chart suggests it just became modestly overvalued:
Wal-Mart’s price, revenue and P/E history of last 10 years:
Walmart announced a year-over-year 4.6% increase in EPS, a 1.4% in U.S. comp sales decline and a 2.9% international net sales increase, in the first quarter 2013. The company increased its dividend 18$ to $1.88 per share, and bought back approximately 30 million shares for $2.2 billion. On June 7, it authorized a new share repurchase program valued at $15 billion.
U.S. Bancorp (USB)
Warren Buffett owns 61,458,101 shares of USB, valued as $2.09 billion as of March 31, 2013, which accounts for 2.5% of his equity portfolio. Donald Yacktman owns 12,678,132 shares of USB, valued as $430 million as of March 31, 2013, which accounts for 2.2% of his equity portfolio.
This is another stock that Yacktman significantly increase his weight in during the first quarter. His firm approximately doubled their position to make the bank 2.2% of their portfolio. They have held the stock since before 2008, however.
Buffett has also traded U.S. Bancorp since before 2008, and increased his position a slight 193,500 shares in the first quarter, after selling millions of shares in the three previous quarters.
U.S. Bancorp was incorporated in Delaware in 1929. It is a multi-state financial services holding company headquartered in Minneapolis, Minn. U.S. Bancorp has a market cap of $65.5 billion; its shares were traded at around $35.25 with a P/E ratio of 12.20 and P/S ratio of 3.30. The dividend yield of U.S. Bancorp stocks is 2.20%. U.S. Bancorp had an annual average earnings growth of 19.6% over the past five years.
U.S. Bancorp has a forward rate of return of 25.5, higher than 90% of the companies in the U.S. global banks industry and at the high end of the company’s historical range.
The Peter Lynch chart suggests undervaluation:
See its 10-year price, revenue, net income and P/E history here:
In the first quarter, U.S. Bancorp announced a 9% increase in earnings per diluted share, driven by year-over-year reductions in noninterest expense and provision for credit losses. Average loan growth was 5.8%, while total nonperforming loans shrank for the fourth consecutive quarter.
The bank on March 7 passed the Federal Reserve Dodd-Frank Act Stress Test with the highest pre-provision net revenue and net income before taxes as a percent of average assets of its peer banks. Due to the results of its 2013 Comprehensive Capital Analysis and Review, the Federal Reserve also allowed it to increase its dividend and authorize a new share buyback program.
To check the consensus holdings of any combination of your favorite Gurus, please go to the Aggregated Portfolio of Gurus. This is one of the features that GuruFocus offers to Premium Members of GuruFocus. If you are not a Premium Member, why not Take a 7-Day Free Trial?
The two men own nine stocks in common. These are the largest: Wells Fargo (WFC, Financial), Coca-Cola (KO, Financial), Procter & Gamble (PG, Financial), Wal-Mart (WMT, Financial) and U.S. Bancshares (USB, Financial).
Wells Fargo (WFC)
Warren Buffett owns 458,170,323 shares of WFC, valued as $16.95 billion as of March 31, 2013, which accounts for 19.9% of his equity portfolio. Donald Yacktman owns 19,200 shares of WFC, valued as $1 million as of March 31, 2013, which accounts for 0.0036% of his equity portfolio.
Wells Fargo & Co. is a corporation organized under the laws of Delaware and a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Wells Fargo has a market cap of $214.02 billion; its shares were traded at around $40.23 with a P/E ratio of 11.40 and P/S ratio of 2.50. The dividend yield of Wells Fargo stocks is 2.40%. Wells Fargo had an annual average earnings growth of 1.6% over the past 10 years.
While Wells Fargo is one of Buffett’s favorite companies, it is Yacktman’s smallest position. It is a mere 0.0036% of his portfolio, even after adding 13,200 shares in the first quarter. The price has gone up 29% from his average purchase price since then.
In the first quarter, Warren Buffett added to his stake for the 13th quarter since 2009:
Wells Fargo’s price, revenue, earnings and P/E history has unfolded in the following manner:
The company also has a forward rate of return of 30.35, higher than 92% of the companies in the U.S. global banks industry, but slightly over the midpoint of the company’s historical range.
According to the Peter Lynch chart, the company is undervalued:
In his 2013 annual shareholder meeting, Buffett said of Wells Fargo and banking in general: “Capital ratios for long banks are at high levels and affects return on equity. Capital ratios increase and return on equity will increase. Banking in the U.S. is stronger than in the past 20 years. Compared to the EU or 20 years ago, it’s dramatically stronger. Don’t worry about banking being the cause of the next bubble. Usually we don’t get to a bubble the same way we got to the last one. I feel good about our investments at MNT and WFC. We won’t earn as much return on equity because the rules change.”
In the first quarter Wells reported record net income, slightly lower revenue, continued loan and deposit growth and a dividend increase to $0.25 quarterly – more than doubling it from the first quarter of 2012 and bringing it nearer its pre-recession level.
Coca-Cola Co. (KO)
Warren Buffett owns 400,000,000 shares of KO, valued as $16.18 billion as of March 31, 2013, which accounts for 19% of his equity portfolio. Donald Yacktman owns 22,889,752 shares of KO, valued as $926 million as of March 31, 2013, which accounts for 4.7% of his equity portfolio.
Yacktman made a huge buy of Coke shares in the first quarter, increasing his stake from 16,584,021 shares to 45,779,504. The increase raised it to his seventh largest position.
Buffett, on the other hand, has sat on his position since he acquired it years ago. It is his second largest position.
The Coca-Cola Co. was incorporated in September 1919 under the laws of the State of Delaware. Coca-Cola has a market cap of $178.01 billion; its shares were traded at around $39.46 with a P/E ratio of 20.80 and P/S ratio of 3.80. The dividend yield of Coca-Cola stock is 2.70%. Coca-cola had an annual average earnings growth of 9.3% over the past 10 years. GuruFocus rated Coca-Cola the business predictability rank of 5-star.
The Peter Lynch chart says Coke is now overvalued:
In the first quarter, Coke’s revenue declined 1%, and EPS declined 13%, year over year. Worldwide volume growth was 4%, with Coca-Cola Americas growing 3% and Coca-Cola international at 5%.
Yacktman commented on the company at the annual Value Investors Conference in May:
“Our central tendency is to have businesses with low cyclicality, Coke (KO) and Pepsi (PEP).
Coke had its all time high at 44 and a half, still hasn’t reached that. Was a good business then and is today. But it was just overpriced. Fast forward and you start to see it at a much better letter. By 2007 we had over 10 percent of the fund in Coca-Cola, much less now as price went up.”
Procter & Gamble (PG)
Warren Buffett owns 52,793,078 shares of PG, valued as $4.07 billion as of March 31, 2013, which accounts for 4.8% of his equity portfolio. Donald Yacktman owns 26,537,423 shares of PG, valued as $2.05 billion as of March 31, 2013, which accounts for 10.5% of his equity portfolio.
Yacktman also just about doubled his share of PG in the first quarter, increasing his stake from 27,752,099 shares to 53,074,846. It thus became his second largest holding, behind News Corp. (NWSA).
Buffett has been made reductions to his Procter & Gamble holding during eight quarters since the fourth quarter of 2008.
Procter & Gamble Co. was incorporated in Ohio in 1905, having been built from a business founded in 1837. Procter & Gamble has a market cap of $211.94 billion; its shares were traded at around $75.93 with a P/E ratio of 19.20 and P/S ratio of 2.70. The dividend yield of Procter & Gamble stocks is 3.00%. Procter & Gamble had an annual average earnings growth of 5.9% over the past 10 years. GuruFocus rated Procter & Gamble the business predictability rank of 2-star.
Yacktman also commented on PG in his first quarter letter:
“Consumer staples performed well with Procter & Gamble (PG) and PepsiCo, Inc. (PEP) being the top contributors to results for the Funds. Both companies struggled last year as they worked through business challenges that produced what we think were below normal profit margins. Last quarter both companies reported results showing margin improvement and the shares rebounded. We like holding positions in companies where we believe profit margins can improve in coming years, a period when we think the general market will see profit margins decline.”
PG also has a 10-year forward rate of return of 2.45%, which is higher than 84% of companies in the global household & personal products industry, though at the low range of the company’s historical range.
The Peter Lynch chart indicates the company is currently overvalued:
In the first quarter, PG reported a 12% increase in core earnings per share and a 2% net sales increase year over year. The company held or grew market share in its businesses that held 50% of sales in the quarter. The results landed in the high end of the company’s expectations for revenue and surpassed the forecast for EPS, operating profit and cash flow.
Wal-Mart Stores Inc. (WMT)
Warren Buffett owns 49,247,235 shares of WMT, valued as $3.69 billion as of March 31, 2013, which accounts for 4.3% of his equity portfolio. Donald Yacktman owns 3,260,097 shares of WMT, valued as $244 million as of March 31, 2013, which accounts for 1.2% of his equity portfolio.Buffett began buying Wal-Mart in 2009 and has added shares in four quarters since then. It is his sixth largest holding.
Yacktman also began buying Walmart in the third quarter of 2009 and has traded it numerous times since, making his largest purchase, 3.24 million shares, in the first quarter of 2013.
Wal-Mart Stores Inc. was incorporated in Delaware in October 1969. Wal-mart Stores has a market cap of $245.04 billion; its shares were traded at around $73.53 with a P/E ratio of 14.60 and P/S ratio of 0.50. The dividend yield of Wal-mart Stores stocks is 2.30%. Wal-mart Stores had an annual average earnings growth of 10.3% over the past 10 years. GuruFocus rated Wal-mart Stores the business predictability rank of 5-star.
Wal-Mart has a forward rate of return of 11.85, higher than 90% of the companies in the global discount stores industry and slightly over the mid range for the company’s history.
The Peter Lynch chart suggests it just became modestly overvalued:
Wal-Mart’s price, revenue and P/E history of last 10 years:
Walmart announced a year-over-year 4.6% increase in EPS, a 1.4% in U.S. comp sales decline and a 2.9% international net sales increase, in the first quarter 2013. The company increased its dividend 18$ to $1.88 per share, and bought back approximately 30 million shares for $2.2 billion. On June 7, it authorized a new share repurchase program valued at $15 billion.
U.S. Bancorp (USB)
Warren Buffett owns 61,458,101 shares of USB, valued as $2.09 billion as of March 31, 2013, which accounts for 2.5% of his equity portfolio. Donald Yacktman owns 12,678,132 shares of USB, valued as $430 million as of March 31, 2013, which accounts for 2.2% of his equity portfolio.
This is another stock that Yacktman significantly increase his weight in during the first quarter. His firm approximately doubled their position to make the bank 2.2% of their portfolio. They have held the stock since before 2008, however.
Buffett has also traded U.S. Bancorp since before 2008, and increased his position a slight 193,500 shares in the first quarter, after selling millions of shares in the three previous quarters.
U.S. Bancorp was incorporated in Delaware in 1929. It is a multi-state financial services holding company headquartered in Minneapolis, Minn. U.S. Bancorp has a market cap of $65.5 billion; its shares were traded at around $35.25 with a P/E ratio of 12.20 and P/S ratio of 3.30. The dividend yield of U.S. Bancorp stocks is 2.20%. U.S. Bancorp had an annual average earnings growth of 19.6% over the past five years.
U.S. Bancorp has a forward rate of return of 25.5, higher than 90% of the companies in the U.S. global banks industry and at the high end of the company’s historical range.
The Peter Lynch chart suggests undervaluation:
See its 10-year price, revenue, net income and P/E history here:
In the first quarter, U.S. Bancorp announced a 9% increase in earnings per diluted share, driven by year-over-year reductions in noninterest expense and provision for credit losses. Average loan growth was 5.8%, while total nonperforming loans shrank for the fourth consecutive quarter.
The bank on March 7 passed the Federal Reserve Dodd-Frank Act Stress Test with the highest pre-provision net revenue and net income before taxes as a percent of average assets of its peer banks. Due to the results of its 2013 Comprehensive Capital Analysis and Review, the Federal Reserve also allowed it to increase its dividend and authorize a new share buyback program.
To check the consensus holdings of any combination of your favorite Gurus, please go to the Aggregated Portfolio of Gurus. This is one of the features that GuruFocus offers to Premium Members of GuruFocus. If you are not a Premium Member, why not Take a 7-Day Free Trial?
