By Aubrey Tabuga
Yacktman Asset Management is a fund manager founded by Donald Yacktman in 1992. Yacktman has over four decades of experience in managing funds. The Austin-based firm manages the Yacktman Fund, Yacktman Focused Fund, and separate organizational accounts. Its investment strategy is to buy growth companies that it believes are undervalued. It seeks investments that have good business, shareholder-oriented management, or low purchase price. In the latest quarter, the firm had $16.6 billion under its management.
It is worth checking what goes into the 13F filing of such a huge fund manager. The big buys for the third quarter are Cisco Systems, Inc. (NASDAQ:CSCO), Stryker Corp. (NYSE:SYK), WellPoint Inc. (WLP), Research in Motion Limited (RIMM), and CH Robinson Worldwide Inc. (NASDAQ:CHRW). I briefly analyze each of these stocks from a fundamental perspective to see whether or not these are worth the attention they are getting, at least from huge investors like Yacktman Asset Management.
% of Portfolio
EPS Growth (next 5Y)
Sources: whalewisdom.com and finviz.com
Cisco Systems, Inc.
Cisco Systems is one of Yacktman's most favored stocks. The manager increased its stake in the company by 14% in the third quarter, bringing the total investment to one that is worth a billion dollars. It has been increasing its position in the company for seven quarters in a row now. Cisco Systems engages in the development, manufacture, and sale of networking products for communications and IT industries around the world. The company recently reported that it will buy Cariden Technologies for $141 million. Cariden is a company that supplies network solutions for telecommunications services providers.
The stock performance is robust, gaining 7.95% from last year and 10.78 within the month. It is operating at a net margin of 17.90%. Earnings have leaped by 27.54% this year and are estimated to grow by 9.43% each year in the long term. Meanwhile, the forward P/E ratio is 9.10, which is lower than the current ratio at 12.26. Cisco is also a top dividend stock with a yield of 2.95%. With sales and earnings that surpass consensus estimates and a stock that still looks cheap, Cisco is indeed a great addition to an investor's portfolio.
The fund manager increased its position in Stryker Corp. by 73% in the latest quarter. The stock has been on the 13F filing of Yacktman for at least the last 9 quarters. Yacktman had not sold a single share of SYK within the 9-quarter period. As of the end of September, Stryker comprised 3.25% of the managing firm's portfolio. Stryker Corp. is a medical technology company operating in three segments - Reconstructive, MedSurg, and Neurotechnology and Spine. It is the world's most admired company in the industry based on Fortune CNNMoney.
The stock is indeed doing well, gaining 9.99% from a year ago. It is operating at a high margin of 16.74%. The earnings per share have grown by 8.33% this year. Likewise, the company is hopeful to enjoy greater earnings in the years to come with its long term annual growth estimate of 10.07%. Meanwhile, SYK is a good dividend payer. The company has been increasing its dividend payment since 2009.
Yacktman bought over 3.5 million shares of Wellpoint in the latest quarter. The purchase was equivalent to 1.23% of the fund manager's total portfolio. The last time that Wellpoint appeared on Yacktman's 13F filing was in the last quarter of 2010 when it sold off its entire stake. WellPoint is a health benefits company operating in the US. The company's bid to purchase Amerigroup for $4.46 billion has recently been cleared by the US government. A concern over the purchase as one that is lessening competition in the industry, particularly in Virginia, has died down as WellPoint successfully addressed this by selling off its Virginia business.
The stock is falling; it had already lost 14.86% from last year. Recently, quarterly sales have been slightly falling, and the company operates at a net margin of mere 4.11%. Notwithstanding this, EPS is expected to grow by 11.20% annually in the next 5 years. Aside from this, Wellpoint is also a high dividend stock with a yield of 2.07%. The merger with Amerigroup is yet to prove its bearing in terms of getting the revenues back on track to perk up the falling stock.
Research in Motion Limited
Yacktman doubled its stake in Research in Motion in the third quarter, bringing the total share to portfolio to 1.06%. The fund manager had increased its position in RIMM for five consecutive quarters now since it initiated its position in the second quarter last year. Research In Motion Limited is a designer, manufacturer, and marketer of wireless solutions for the world's mobile communications market. The Waterloo, Canada-based company is the owner of the Blackberry smartphone portfolio. Despite the tough competition that the company has faced these past few years, it remains the top-selling smartphone in several South American and African countries.
The stock price had lost a great deal, 20.41% from the previous year, but it has been quickly picking up. It had gained a massive 64.39% in the quarter. The company is currently facing losses, which it had estimated to go down in the next year. However, the huge challenge remains. It needs to boost up revenues and improve its margins so it could achieve much faster growth.
CH Robinson Worldwide Inc.
The fund management firm had initiated a position in CH Robinson in the latest quarter. The stake was worth approximately $41 million. This is the first time that the company has appeared in the 13F filing of Yacktman. C.H. Robinson Worldwide, Inc. is a freight transportation services and logistics solutions provider to various industries around the world. The company is based in Eden Prairie, Minnesota. CHRW had just announced earlier this month that it had finalized its acquisition of Phoenix International, Inc.
The stock had lost 9.74% from last year but has recently been recovering up. In fact, the performance within the quarter had gone up by 11.12%. The growth prospects for CH Robinson are pretty high with the earnings expected to grow by 13.08% per year in the long term. The company had a good record in revenue growth in the past years. At the same time, it pays increasing dividends to its investors for many years now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.