Avon (NYSE:AVP)’s shares declined during the quarter, as the company faced what we think will prove to be short-term challenges in the company’s long-run turnaround plan. We own both the equity and the debt of Avon in the Fund. Owning debt is a part of the flexibility we referred to earlier in this update, and typically, when we own debt, the rate of return we expect to achieve is similar to that of a stock of which we might invest. However, due to its seniority in the capital structure of the business, we believe it may offer a lower-risk method of achieving a higher return.
From Yacktman Focused Fund (Trades, Portfolio) first quarter 2017 shareholder letter.
