This article is part of a series that provides an ongoing analysis of the changes made to Donald Yacktman's US stock portfolio on a quarterly basis. It is based on Yacktman Asset Management's regulatory 13F Form filed on 08/04/2014. Please visit our Tracking Donald Yacktman's Yacktman Asset Management series to get an idea of his investment philosophy and the fund's moves during Q1 2014.
This quarter, Yacktman's US long portfolio increased from $24B to $24.59B. The number of holdings remained steady at 47. The largest holding is PepsiCo Inc. at 11.45% of the US long portfolio. Largest five individual stock positions are PepsiCo Inc., Procter & Gamble, Twenty First Century Fox, Coca-Cola Company, and Cisco Systems and they together account for just over 43% of the US long portfolio. The firm has over $30B in Assets Under Management (AUM) and currently has over 20% in cash - a far cry compared to zero cash immediately following the financial crisis. The portfolio is concentrated with recent 13F reports showing around 50 individual positions.
Covidien plc (COV): COV was a very small position that was first purchased in 2007. The stake has fluctuated over the years and as of last quarter the position was still very small at 0.55% of the US long portfolio. This quarter, the stake was eliminated at prices between $69 and $92. The stock currently trades at around $88. In mid-June 2014, Medtronic (NYSE:MDT) agreed to buy Covidien in a cash-and-stock transaction: the deal was valued at $93.22 per Covidien share at the time.
Avon Products (NYSE:AVP): AVP is a 1.61% of the US long portfolio position. The original stake was a 15M share position established in 2011 at prices between $16 and $29. The stake was increased to 18.9M shares by the end of 2012 at prices between $14 and $23. Last quarter saw further buying as the position size was increased by about one-third at prices between $14.28 and $17.22 and this quarter saw an 8% increase at prices between $13.30 and $15.30. The stock currently trades below his purchase ranges at $13.24. The aggressive stake build-up indicates a clear bullish bias. For investors attempting to follow Yacktman, AVP is a very good option to consider.
Becton, Dickinson (NYSE:BDX): BDX is a small 0.63% of the US long portfolio position first purchased in 2010 at prices between $67 and $85. The stake was doubled in 2011 at prices between $71 and $89 but has since been reduced. Last quarter, the position was reduced by around one-fourth at prices between $105 and $117. This quarter saw a marginal increase. The stock currently trades at around $117.
Microsoft Corporation (NASDAQ:MSFT): MSFT has been in the portfolio since 2003 and it became a significantly large position in 2006 when around 2.2M shares were purchased at prices between $22 and $29.50. The bulk of the current 5.58% of the US long portfolio stake was established in 2011 when ~20M shares were purchased at prices between $24 and $28.50. Last quarter saw the stake increased by 3.6% at prices between $35 and $41 and this quarter the pattern continued with a marginal increase. The stock currently trades at $43.37. Yacktman continues to stay bullish on MSFT.
Procter & Gamble (NYSE:PG): PG is another very long-term position that has been in the portfolio since Yacktman's first 13F filing in 1999. The position size remained insignificantly small until 2007 when about 520K shares were purchased at prices between $61 and $74. The position was cut in half in 2008 but the following four-years saw a 100-fold stake increase at prices between $47 and $70. The position had remained relatively steady since although this quarter saw a 6% increase at prices between $78.50 and $83. The stock currently trades at $79.22.
Twenty First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA): Yacktman had a very small position in News Corporation (NASDAQ:NWS) in 2008. The 2009 to 2012 timeframe saw a huge stake build up as the share count increased 32-times (2.5M shares to over 80M shares). Since the spinoff and renaming of News Corporation, both positions had seen selling - the NWS stake was eliminated in Q4 2013 and the FOXA stake was reduced by around 28%. Last quarter saw a 6% trimming at prices between $30.73 and $35.63. This quarter saw a marginal stake increase. Yacktman's average cost-basis on this position is very low and it accounts for close to 9% of the US long portfolio.
Wal-Mart Stores (NYSE:WMT): WMT is a long-term position that was first purchased in 2004. The bulk of the current position was purchased in 2011 when around 2M shares were acquired at prices between $50 and $60. The stock currently trades at $73.54. This quarter saw a minor stake increase and the position now accounts for 1% of the US long portfolio.
The Bank of New York Mellon Corporation (NYSE:BK), Comcast Corporation (NASDAQ:CMCSA), eBay Inc. (NASDAQ:EBAY), Patterson Companies (NASDAQ:PDCO), Sigma-Aldrich Corporation (NASDAQ:SIAL), & US Bancorp (NYSE:USB): These are significant positions (more than ~0.5% of the US long portfolio) that were increased marginally (less than ~2% change in position size) this quarter. As the activities were very minor, they do not indicate a clear change in bias.
Apollo Group (NASDAQ:APOL): APOL is a small 0.48% of the US long portfolio position that was reduced by ~50% last quarter at prices between $26.90 and $35.24. This quarter saw a marginal reduction. The stock currently trades at $27.86. The original position consisted of ~2.9M shares purchased in 2010 at prices between $34 and $65. The position was built up to ~7.5M shares by 2012 and since then had been kept steady. The activity indicates a clear bearish bias. Yacktman realized long-term losses from this position.
C.R. Bard Inc. (NYSE:BCR): BCR is a 3.90% of the US long portfolio position that was reduced by ~12% last quarter at prices between $125 and $148. This quarter saw further marginal trimming. The original position consisted of ~2.14M shares purchased in 2010 at prices between $76 and $96. The stake was built up to just over 7.4M shares by 2012 and since then has seen some selling.
C.H. Robinson Worldwide Inc. (NASDAQ:CHRW): CHRW was an insignificantly small position (~700K shares) first purchased in 2012. During Q1 & Q2 2013, ~5.4M shares were purchased at prices between $54 and $67. The stock currently trades at $68.46. The last three quarters saw minor buying but this quarter saw a marginal stake reduction. The position currently stands at 1.70% of the US long portfolio.
Coca-Cola Company (NYSE:KO) & PepsiCo Inc. (NYSE:PEP): KO & PEP are very long-term positions that have been in the portfolio for over fifteen years. During Yacktman's first 13F filing in Q1 1999, the positions consisted of just a few thousand shares each. The KO stake was built up to almost 2.4M shares by Q4 2006. The position size dropped below 1.5M shares in Q4 2008 but since then the stake was consistently increased - the position doubled in both 2009 & 2010 and increased by ~150% each in 2012 & 2013. The huge stake build-up happened at prices between $21 & $30 and $33.50 & $43 in the 2009-10 & 2012-13 periods respectively. The stock currently trades at $39.40 and the position stands at 7.64% of the US long portfolio. The even larger 11.45% PEP stake was similarly built-up over multiple years with the bulk of the buying happening in the 2011-13 timeframe - over 22M shares were purchased during that time at prices between $60 and $86. The stock currently trades at $89.69. The two positions were kept relatively steady so far this year although minor adjustments were made in both quarters.
Corning Inc. (NYSE:GLW): GLW is a small 0.63% of the US long portfolio position that was reduced by almost half last quarter at prices between $17 and $20.82 and another one-third this quarter at prices between $20.38 and $22. The stock currently trades at $20. GLW has been in the portfolio since 2010 and the bulk of the current position was purchased in 2011 at prices between $12 and $23. The significant selling indicates a bearish bias.
Hewlett Packard (NYSE:HPQ): HPQ is a small 0.46% of the US long portfolio position that was reduced by around 30% (~1.8M shares) last quarter at prices between $27.45 and $32.56. It was reduced by another 17% this quarter at prices between $31.58 and $35.16. Another large chunk (~3.3M shares) was also sold in Q3 2013 as well at prices between $21 and $27. Most of the current position was acquired in 2011 at prices between $22 and $49. The stock currently trades at $35.33. The large stake reductions over multiple quarters indicate a clear bearish bias.
Stryker Corporation (NYSE:SYK): SYK is a 3.49% of the US long portfolio position first purchased in 2009. The majority of the current stake was established in 2012 at prices between $50 and $57. The position had since been trimmed slightly over the last four quarters. This quarter saw a marginal increase. The stock currently trades at $80.58. Yacktman has a large exposure to the healthcare industry, a group that also includes Johnson & Johnson, C.R. Bard, Covidien, Sigma-Aldrich, and Wellpoint.
Cisco Systems (NASDAQ:CSCO), Clorox Company (NYSE:CLX), ConocoPhillips (NYSE:COP), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Oracle Corporation (NYSE:ORCL), State Street Corporation (NYSE:STT), SYSCO Corporation (NYSE:SYY), Viacom Inc. (NASDAQ:VIAB), Wellpoint Inc. (WLP), and Wells Fargo (NYSE:WFC): These are significant positions (more than 0.5% of the US long portfolio) that were reduced marginally (less than ~2% change in position size) this quarter. As the activities were very minor, they do not indicate a clear change in bias.
Yacktman is known to shy away from investing in banks but it is interesting that he has held significant stakes in three banks since the financial crisis: The Bank of New York Mellon (1.18%), US Bancorp (2.23%), and Wells Fargo (0.91%).
The spreadsheet below highlights changes to Yacktman's US stock holdings in Q2 2014:
Disclosure: The author is long CSCO. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.