The Yacktman Fund (Trades, Portfolio) on Monday disclosed adding a stake in KT&G Corp. (XKRX:033780, Financial), the largest cigarette company in South Korea, and more than doubling its position in Bollore SA (XPAR:BOL, Financial), a France-based infrastructure company, during the first quarter.
The $15.7 billion Yacktman Fund (Trades, Portfolio), headquartered in Austin, is run by Stephen Yacktman, son of founder and legendary investor Donald Yacktman (Trades, Portfolio). Its aversion to risk allowed it to outperform the down markets of 2000 to 2002 and 2008 to 2009, and produce a return of 10.48% since inception, beating the 9.77% return in the S&P 500.
In seeking stocks, the firm tends to look for good businesses with shareholder-oriented management at low purchase prices.
Going into the first quarter, Yacktman Fund (Trades, Portfolio) commented on finding value in an expensive market:
“As always, as we find individual investment opportunities, we make investments regardless of general market valuations … A market driven by growth-oriented shares in an already expensive investment climate is not one we would have expected to largely keep up with given our strong focus on quality, attractive valuations and risk management. Security selection allowed us to achieve good results and we believe this ability will allow us to thrive going forward.”
KT&G Corp. (XKRX:033780, Financial)
A leading cigarette maker in South Korea, KT&G Corp. ranks as one of the smallest worldwide. It has a 1.2% cigarette market share globally as of 2016, Statista reported.
KT&G shares have gained 26% over the past 10 years and slid 1% over the past year. Its main price ratios are near multi-year troughs: The price-earnings of 10.76 is at a five-year low, the price-book of 1.61 is near a 10-year low and the price-sales of 2.68 is near a three-year low.
In addition to tobacco, KT&G sells red ginseng, cosmetic products, health foods and pharmaceuticals. In November, it launched a tobacco-heating device in following the heat-not-burn trend in tobacco products. The device, called lil, uses a battery to heat up tobacco without burning it, eliminating smoke.
On Feb. 1, KT&G announced a record high of 1.482 trillion won ($1.3 billion) in overseas sales in 2017. The revenue resulted from 55.4 billion cigarettes sold overseas, which increased from 48.7 billion cigarettes in 2016. According to the company, it is expanding into emerging markets such as Africa and Central and South America to tap growth.
KT&G has a forward dividend yield of 4.04% and share buyback ratio of 0.10.
The company’s financial strength is eight out of 10, and its profitability and growth rating is eight out of 10.
Operating margins of 30.56% in 2017 were higher than 76% of the companies in the global tobacco industry.
Shares of KT&G traded for 99,100 won ($92.86) each on Tuesday afternoon.
Yacktman Fund (Trades, Portfolio) purchased 582,674 shares of the company during the first quarter, making it 0.89% of its stock portfolio. The stock’s share price averaged 103,436 won for the quarter.
Bollore SA (XPAR:BOL, Financial)
Transportation, logistics, communication, electricity storage solutions company Bollore was founded in 1822 in France and is majority owned by the Bollore family.
Bollore’s transportation and logistics segment has a presence in 105 countries in ports, railroads and freight forwarding. Its electricity storage segment makes films for capacitors and materials used in electric buses and cars, electric batteries and others. Its communications segment owns a shareholding in Havas, a French advertising company, and does business in newspapers and telecoms.
In 2017, Bollore began a merger of two companies in which it owned majority stakes, French media company Vivendi and Havas. Vivendi completed the acquisition of a 59.2% stake in Havas held by the Bollore Group for 9.25 euros per share in July. The mastermind of the deal was French billionaire Vincent Bollore, dubbed a “corporate raider” by international media.
Shares of Bollore have risen 216% over the past 10 years and 26% over the past year. They trade for 3.55 euros per share as of Tuesday afternoon.
Bollore generated a profit annually for the past decade through 2017 and free cash flow in the each year except 2006 and 2007.
For 2017, Bollore reported an 82% increase in revenue to 18.33 billion euros with the inclusion of Vivendi. Net income rose 58% to 2.08 billion euros.
Bollore proposed a dividend of 6 euro cents per share, which will be voted on at the general meeting of shareholders in June.
The Yacktman Fund (Trades, Portfolio) purchased 10,427,551 shares of Bollore in the fourth quarter, increasing its position by 119.35% to 19,164,211. The holding represented 1.67% of the portfolio. The share price averaged 4.50 euros for the quarter.
Sells
The Yacktman Fund (Trades, Portfolio) also decreased its stakes in: Cisco Systems (CSCO, Financial), Stryker Corp. (SYK, Financial), Microsoft (MSFT, Financial) and Sysco Corp. (SYY, Financial).
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See the Yacktman Fund's portfolio here.Ă‚
