12 Top Buys and Sells of Gurus Donald and Stephen Yacktman

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 |  Includes: CL, CLX, CSCO, HPQ, INTC, JNJ, MSFT, NWSA, PEP, PG, SYY, USB
by: GuruFundPicks

Summary: Acclaimed Father and Son Team Donald and Stephen Yacktman’s Mutual Funds with $8.2 billion in assets, rated Five Stars by Morningstar, and ranked in the top one percentile in their category, have returned 232% cumulative over the last ten years versus 38% for the S&P 500. Their major purchases over the March 2011 quarter included Pepsico, Inc. (NYSE:PEP), Procter & Gamble (NYSE:PG), Microsoft Corp. (NASDAQ:MSFT) and News Corporation (NASDAQ:NWSA); their top sell was Clorox Co. (NYSE:CLX); and they added a new position in Intel Corp. (NASDAQ:INTC).

Austin, Texas-based Mutual Fund Company Yacktman Asset Management manages $8.2 billion in assets and is headed by father and son team Donald and Stephen. Donald founded the firm in 1992 and has been managing money since 1967. He is the President and Co-Chief Investment Officer of the firm, and Co-Portfolio Manager for The Yacktman Funds. Son Stephen joined him in 1993 after receiving his MBA and is the Vice-President, Portfolio Manager and Co-Chief Investment Officer of the firm, and co-Portfolio Manager of The Yacktman Funds.
Over the last ten years, the $5.2 billion Yacktman Fund delivered a cumulative 224% return and the $3 billion Yacktman Focused Fund delivered a cumulative 243% return, well ahead of the 38% total return for the S&P 500 over the same period. Both Yacktman Funds are rated five stars by Morningstar and are in the top one percentile in their categories for the ten-year period. Don Yacktman received Morningstar’s 1991 manager of the year award for his 46% return in 1991, and he was also named a finalist for Morningstar’s domestic equity manager of the decade award.

The Yacktmans are opportunistic and scour the entire universe for ideas that generate the best possible return, whether it is small caps, large caps or debt instruments. They are true value buyers and bargain hunters who like it when securities go on sale when the market declines. They combine patience and opportunism-- and when valuations warrant it, particularly during dislocations and after discomforting news-- they are known to take sizable positions very quickly. As a result, they are typically going in the opposite direction of the herd of investors. For example, the Yacktman Fund lagged behind the indexes in the late 90s during the tech bubble, but the fund returned a cumulative 51% from 2000 to 2002 while the broader market tanked and the S&P 500 was down 38% during that same period.

The fund holds a concentrated portfolio of 64 equity positions, about 90% of that in large-caps and most of the remaining 10% in mid-caps. Their portfolio turnover is less than 10%, implying an average holding period of more than ten years. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that their portfolio is mostly concentrated in the Consumer, Services, Healthcare and Technology Sectors.

The following summarizes their new picks and pans in the latest reported 13-F filing for the March 2011 quarter, and updated based on any 13-G filings since the end of the quarter:

  • Technology Sector: They added $365 million to their prior $590 million position in the Technology Sector by significantly adding to their holding in Microsoft Corp. (MSFT), a developer of operating systems, business software, and other applications for servers, PCs, and intelligent devices; Cisco Systems Inc. (NASDAQ:CSCO), a manufacturer of switches, routers, and other networking and communications hardware for business and home applications; Hewlett-Packard Co. (NYSE:HPQ), a provider of IT and outsourcing services, PCs and peripherals, printers and scanners, and servers and storage devices; and Intel Corp. (INTC), a manufacturer of microprocessors, chipsets, network processors, motherboards, non-volatile memory and storage.
  • Consumer Staples Sector: They added $630 million to their prior $1.8 billion position in the Consumer Staples Sector by significantly adding to their holdings in Pepsico Inc. (PEP), a manufacturer of a variety of salty, convenient, sweet grain-based snacks and carbonated and non-carbonated drinks; Procter & Gamble (PG), a manufacturer of beauty care products, cleaning products, diapers, tissues, health care, toothpaste, snacks and beverages; and Colgate Palmolive (NYSE:CL), a manufacturer of toothpaste, toothbrushes, dishwashing liquid, fabric conditioners, shampoos, soaps and pet nutrition. Furthermore, they significantly reduced their position in Clorox Co (CLX), a manufacturer of cleaning products, trash bags, water filtration systems, auto care products and food items.
  • Services Sector: They added $410 million to their prior $2 billion position in the Services Sector by significantly adding to their holding in News Corporation (NWSA), an international holding company engaged in newspaper, magazine, book publishing, TV, broadcasting and films; and Sysco Corp. (NYSE:SYY), a distributor of food and related products to the food-service industry via 180 distribution centers in the U.S. and Canada.
  • Healthcare Sector: They added $150 million to their prior $1.3 billion position in the Healthcare Sector by significantly adding to their holding in Johnson & Johnson (NYSE:JNJ), a developer of healthcare products and provider of related services to the consumer, pharmaceutical and medical markets.
  • Financial Sector: They added $50 million to their prior $350 million position in the Financial Sectors by significantly adding to their holding in U.S. Bancorp. (NYSE:USB), a holding company for U.S. Bank operating through 3,482 branches in 24 mid-western and western states.


Table
Company
Ticker
Position Action
Market Value at end of March 2011 Quarter
Change from Prior Quarter
Percent of Portfolio
Percent Shares Owned
Pepsico Inc.
PEP
Add
$ 944 million
$ 337 million
11.82%
0.93%
Procter & Gamble Co.
PG
Add
$ 579 million
$ 266 million
7.25%
0.34%
Microsoft Corp.
MSFT
Add
$ 544 million
$ 216 million
6.81%
0.25%
News Corp.
NWSA
Add
$ 958 million
$ 202 million
12.88%
3.21%
Sysco Corp.
SYY
Add
$ 302 million
$ 167 million
3.78%
1.87%
Johnson & Johnson
JNJ
Add
$ 309 million
$ 106 million
3.87%
0.19%
Cisco Systems Inc.
CSCO
Add
$ 189 million
$ 97 million
2.37%
0.20%
Clorox Co.
CLX
Cut
$ 190 million
($ 65) million
2.38%
2.03%
Colgate Palmolive Co.
CL
Add
$ 71 million
$ 65 million
0.89%
0.18%
Hewlett Packard Co.
HPQ
Add
$ 180 million
$ 46 million
2.25%
0.20%
Us Bancorp
USB
Add
$ 203 million
$ 46 million
2.54%
0.40%
Intel Corp.
INTC
New
$ 43 million
$ 43 million
0.54%
0.04%
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Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.