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Q&A Session with Don Yacktman and Brian Yacktman

September 21, 2009
(GuruFocus, September 21, 2009) Very Few investors pulled through the hideous 2008 unscratched. Not even the Investment Gurus, Not even Warren Buffett. Buffett saw his stock portfolio dropped about 31% in 2008, by my estimate. Of course, there are people made billions during the crisis, such as Prem Watsa, John Paulson. But these people essentially made money by shorting. If you have a long-only strategy and you avoided the disaster of 2008 and took advantage of the powerful rally in 2009, you have done a good service for yourself and your investors.

I put an emphasis on the word “and” above because it is highly possible for one to go substantially high in cash in 2008 and avoided the collapse, but also to be sidelined completely by the rally in 2009.

There are only a few people got it right, both ways. One of them is Investment Guru Donald Yacktman.

Yacktman went into 2008 with about a large cash position and avoid financials altogether. His Yacktman Fund (YACKX) actually did decline 26% in 2008 (still outperforming S&P 500 by 11%). But in 2009, his fund came back far more than the market. According to Google Finance data, Yacktman Fund (YACKX) has returned YTD 49.5% and the more concentrated Yacktman Focus Fund (YAFFX) is up 52.3%. Both gained a lot more than they lost during the last year.

And it is not in just the past two years that he might get lucky. Kiplinger’s ranked both Yacktman funds very high in the “Large Company Value Fund” category, topping in the 1, 3, and 10-year performance.

Donald Yacktman achieved the honor by steering clear of high-techs in the high-tech bubble! In 1999, his sticking-to-the-value strategy actually cost him -16.9% in performance, but the investors was rewarded for the following three years. Yacktman Fund returned 13.46%, 19,47%, and 11.41% during year 2000, 2001, and 2002, when S&P 500 declined three years in row.

Performance of The Yacktman Fund
Year Return (%) S&P500 (%) Excess Gain (%)
2008 -26.05 -37 11.0
2007 3.39 5.61 -2.2
2006 15.95 15.79 0.2
2005 -1.3 4.91 -6.2
2004 9.93 12 -2.1
2003 33.03 28.7 4.3
2002 11.41 -22.1 33.5
2001 19.47 -11.9 31.4
2000 13.46 -9.1 22.6
1999 -16.9 21 -37.9

Now that the market has climbed more than 50% from its March lows, and market is on a cross-roads again. Where can investors can find opportunities? Watch this recent Bloomberg interview:

As of now, Yacktman thinks the excessive forward spread offered by the lower quality issues is a thing of the past, now he is back to safe stocks such as Coke-Cola, Pepsi and P&G.

GuruFocus thinks the success Mr. Yacktman has had during the past 10 years entitles him to advise our users on how to manage their money, how to avoid treacherous pitfalls in the future, where to look for investment opportunities, and how he valuates a stock…

As some background information, these are the top ten holdings of Yacktman’s mutual funds as of 2Q09:

TickerShares Value ($1000) Weighting as of 2009-06-30 (%) Share # Change from Last Period
ACF 6,275,310 85,030 7.99% -25.99%
VIA-B 3,682,990 83,604 7.85% +7.82%
KO 1,717,495 82,423 7.74% +27.5%
MSFT 3,309,975 78,678 7.39% +13.75%
NWS-A 8,553,695 77,924 7.32% +51.95%
PEP 1,295,425 71,197 6.69% +103.32%
PFE 4,196,540 62,948 5.91% +393.57%
EBAY 3,011,110 51,580 4.84% -1%
COP 1,052,315 44,260 4.16% +251.71%
PG 673,947 34,439 3.23% +199.8%

And these are the top ten purchases during 2Q09

Ticker Action Impact to Portfolio Comment Current Shares
PFE Add 4.71% Add 393.57% 4,196,540
PEP Add 3.4% Add 103.32% 1,295,425
COP Add 2.98% Add 251.71% 1,052,315
NWS-A Add 2.5% Add 51.95% 8,553,695
PG Add 2.15% Add 199.8% 673,947
KO Add 1.67% Add 27.5% 1,717,495
JNJ Add 1.48% Add 497.45% 333,615
HPQ Buy 1.26% New holding, 347162 sh. 347,162
USB Add 1.23% Add 531.46% 864,582
TYIDY.PK Buy 1.18% New holding, 505000 sh. 505,000

For the compete holding and trading information, click here.

We are fortunate that this veteran money manager agreed to our invitation to give us a web-based Q&A as announced here.

In this special Q&A, we are fortunate also have Brian Yacktman join Donald to answer our questions. Brian Yacktman is a son of Donald and has opened his own money management firm. Brian was trained by his father and the two share a lot of stock ideas. Brian differs from his father in that he also deploys options to enhance performance and manage risk. Brian’s performance can be found here.

You can submit your answer in either this original thread or respond to this thread.

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