Tracking Yacktman Asset Management Portfolio - Q2 2018 Update

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Includes: ABBV, ANTM, AVP, BAC, BK, BRK.A, BRK.B, CHRW, CL, CLX, CMCSA, COP, CRMT, CSCO, CTSH, DIS, FOX, FOXA, GLW, GS, HSY, INFY, JNJ, KO, MO, MSFT, NWS, ORCL, OTEL, PEP, PG, PM, RDI, SPY, STT, SYK, SYY, UHAL, UN, USB, WFC, XOM, YACKX, YAFFX, YASSX
by: John Vincent
Summary

Yacktman's 13F equity portfolio value decreased from $9.72B to $8.05B this quarter.

Yacktman Asset Management decreased Twenty-First Century Fox, Microsoft, Sysco, and Cisco Systems substantially during the quarter.

Their largest five stakes are at ~59% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Yacktman's 13F stock portfolio on a quarterly basis. It is based on Yacktman Asset Management's regulatory 13F Form filed on 08/03/2018. Please visit our Tracking Yacktman Asset Management series to get an idea of his investment philosophy and our previous update for the fund's moves during Q1 2018.

This quarter, Yacktman Asset Management's (YACKX) (YAFFX) (YASSX) 13F portfolio value decreased ~17% from $9.72B to $8.05B. The number of holdings decreased from 45 to 39. The largest holding is Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA) at 17.38% of the 13F portfolio. Largest five individual stock positions are Twenty-First Century Fox, Procter & Gamble (NYSE:PG), PepsiCo, Inc. (NYSE:PEP), Coca-Cola (NYSE:KO), and Johnson & Johnson (NYSE:JNJ), and they together account for 58.50% of the 13F portfolio. The firm currently holds around one-third cash - a far cry compared to zero cash immediately following the financial crisis. The portfolio is concentrated with recent 13F reports showing around 40 individual positions. 25 of their stakes are significantly large (over ~0.5% of the 13F portfolio each) and they are the focus of this article.

To know more about Yacktman's bottom-up value investing philosophy, check-out the book "Value Investing: From Graham to Buffett and Beyond".

Stake Decreases:

Twenty-First Century Fox: FOXA is Yacktman's largest 13F position by far at 17.38% of the portfolio. They had a very small position in News Corporation (NWS) in 2008. The 2009 to 2012 time frame saw a huge stake build up as their share count increased 32 times (2.5M shares to over 80M shares). Since the spinoff and renaming of News Corporation, both positions (News Corp. and Twenty-First Century Fox) saw selling - the News Corp. stake was eliminated in Q4 2013 and the FOXA stake was substantially reduced. Yacktman's cost-basis on FOXA is very low. There was a 52% reduction this quarter at prices between $35.50 and $50.

Note: The stock is at $45.42, up ~75% in the last nine months. In December, Walt Disney Company (DIS) agreed to acquire the film and entertainment assets of Twenty-First Century Fox in an all-stock deal (0.2745 shares of Disney for each share). The deal excludes broadcasting networks and stations, news channel, business network, and Sports - FS1 and FS2, Fox Deportes, and Big Ten Network.

Coca-Cola Company: KO is a very long-term position that has been in the portfolio for over 18 years. During Yacktman's first 13F filing in Q1 1999, the position consisted of just a few thousand shares. The 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 size doubled in both 2009 and 2010 and increased by ~150% each in 2012 and 2013. The huge stake build-up happened at prices between $21 and $30 and $33.50 and $43 in the 2009-10 and 2012-13 periods respectively. The stock currently trades at $46.62 and the position stands at ~8% of the portfolio. The six quarters through Q3 2016 had seen a ~57% reduction at prices between $38 and $47. There was a ~10% trimming this quarter at prices between $41.50 and $45.

Johnson & Johnson: JNJ is a large (top five) ~8% of the 13F portfolio position that has been in the portfolio since their first 13F filing in Q1 1999. The bulk of the current position was purchased in 2011 in the low 60s price range. The stock has doubled and currently trades at around ~$132. The six quarters through Q3 2016 had seen a combined ~30% reduction at prices between $91 and $125. Last seven quarters have also seen a ~16% combined reduction. Yacktman is harvesting gains.

Oracle Corporation (ORCL): The large 7.72% ORCL position was first purchased in Q2 2013. Over 20M shares were acquired at prices between $30 and $35. H1 2015 saw a ~23% reduction at prices between $40 and $45. The five quarters through Q3 2016 saw another one-third reduction at prices between $34 and $42. The next four quarters had also seen a combined 25% selling at prices between $38.50 and $53. The stock currently trades at $48.47. Last three quarters have seen minor trimming.

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 5.24% of the portfolio stake was established in 2011 when ~20M shares were added at prices between $24 and $28.50. 2014 to 2016 saw an overall stake reduction of ~70% at prices between $36 and $63. The stock currently trades at $108. H1 2017 saw another ~20% selling at prices between $62 and $72.50. There was a ~11% reduction in Q4 2017 at prices between $74 and $87 and that was followed with a similar trimming last quarter at prices between $85 and $97. There was another ~24% selling this quarter at prices between $88.50 and $103. Yacktman is harvesting huge long-term gains from this position.

Sysco Corporation (NYSE:SYY): SYY is a 3.74% of the 13F portfolio position. It was established in 2010 with the bulk purchased in 2011 and 2012 in the high-20s price-range. Q3 2015 saw a ~24% reduction at prices between $36 and $41 and that was followed with a ~20% reduction the following quarter at prices between $39 and $42. The next nine quarters had seen another ~63% selling at prices between $39.50 and $64. The stock currently trades at $68.57. There was another ~40% reduction this quarter at prices between $58 and $68. Yacktman is harvesting gains.

Cisco Systems (CSCO): CSCO is a 3.73% of the 13F portfolio position first purchased in 2010. The bulk of the current position was purchased in 2011 and 2012 at prices between $15 and $22. The stake has been sold down since. 2015 saw a ~45% reduction at prices between $25.52 and $29.61 while the following year saw a ~20% reduction at prices between $23 and $32. There was a ~70% selling over the last three quarters at prices between $34 and $46. The stock currently trades at $42.83. Yacktman is harvesting gains from this position.

US Bancorp (USB): The 2.80% USB position has been in the portfolio for over 15 years. Majority of the current stake was purchased in 2011 in the low-20s price-range. The stock currently trades at $52.91. 2015 saw a ~50% reduction in the low-40s price range while Q4 2016 saw another ~25% selling at prices between $42.50 and $52.50. Last three quarters have seen minor trimming.

Anthem Inc. (ANTM) previously Wellpoint, Inc.: ANTM is a 2.43% of the 13F portfolio position purchased in 2012 at prices between $55 and $74. The stake has seen some selling over the years. Q1 2015 saw a ~15% reduction at prices between $123 and $158 and that was followed with a huge ~60% reduction in the following quarter at prices between $151 and $171. Q4 2017 saw a ~18% selling at prices between $184 and $235. The stock currently trades at ~$258. There was marginal trimming in the last two quarters.

The Bank of New York Mellon (BK): The 2.29% BK stake was first purchased in 2009 with the bulk of the current position built in 2010 and 2011 in the high-20s price range. The stock is now at $52.77. The position was reduced by ~30% in Q4 2016 at prices between $39 and $49. There was minor trimming in the last three quarters.

Exxon Mobil (XOM): XOM is a 2.28% of the portfolio stake first purchased in 2007. The bulk of the position was acquired in 2013 in the low-90s price-range. The stock currently trades below that range at ~$80. Q4 2015 saw a ~30% reduction at prices between $74 and $87 and that was followed with a ~15% reduction in Q2 2016 at prices between $82 and $94. Q4 2016 also saw another ~20% selling at prices between $83 and $88.50. Last six quarters have seen a combined ~12% reduction at prices between $72.50 and $91.

Infosys Ltd. (INFY): The 1.40% INFY position was established in Q2 2017 at prices between $14.25 and $15.80 and increased by ~60% the following quarter at prices between $14.25 and $16. The stock is currently above those ranges at $20.54. There was marginal selling in the last three quarters.

Wells Fargo (WFC): WFC is a small 1.31% of the 13F portfolio position first purchased in Q1 2013. The bulk of the current position was purchased in Q2 2013 when ~4.8M shares were acquired at prices between $36.50 and $44.50. Q2 and Q3 2014 saw significant selling as the position was reduced to 2.8M shares at prices between $48 and $54. 2015 saw a ~25% further reduction at prices between $51 and $58. The stock currently trades at $58.83. There was marginal trimming in the last six quarters.

Cognizant Technology (CTSH): CTSH is a small 1.25% position established in Q2 2017 at prices between $57.50 and $68 and the stock is now well above that range at $77.82. Last four quarters saw minor trimming.

Comcast Corporation (CMCSA): CMCSA is a 0.71% of the 13F portfolio position first purchased in 2008. The bulk of the original stake was purchased in 2009 at a cost-basis around $7.50. 2014 saw a ~40% reduction at prices between $26.50 and $30.50. 2015 saw a further two-thirds reduction at prices between $26.50 and $32. The three quarters through Q2 2017 saw a combined ~50% selling at prices between $30 and $42. The stock currently trades at $35.41. This quarter saw a ~10% trimming.

Note: The prices quoted above are adjusted for the 2-for-1 stock-split in Q1 2017.

Avon Products (AVP), C.H. Robinson Worldwide, Inc. (CHRW), ConocoPhillips (COP), Stryker Corporation (SYK), and Unilever NV (UN): These are very small positions (less than ~2% of the portfolio each) that saw selling this quarter.

Stake Increases:

Procter & Gamble: PG is a 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 four quarters through Q3 2016 saw a 50% reduction at prices between $72 and $90. The stock currently trades at $82.33. PG is Yacktman's second-largest position at 15% of the portfolio. There was a minor increase over the last two quarters.

PepsiCo Inc. (PEP): The ~11% (top three) PEP stake was built-up over multiple years with the bulk of the buying happening in the 2011-13 time frame: over 22M shares were purchased during that time at prices between $60 and $86. The stock currently trades at $116. The six quarters through Q3 2016 had seen a roughly two-thirds reduction at prices between $91 and $111. There was a marginal stake increase this quarter.

Amerco (UHAL) and Colgate-Palmolive (CL): These very small (less than ~1% of the portfolio each) stakes saw increases this quarter.

Kept Steady:

State Street Corporation (STT): The very small 1.14% STT stake was kept steady this quarter.

Note 1: Yacktman is known to shy away from investing in banks but has held significant stakes in three banks since the financial crisis: The Bank of New York Mellon (2.29%), US Bancorp (2.80%), and Wells Fargo (1.31%).

Note 2: Very small (less than 0.5% of the portfolio each) positions account for 1.38% of the overall portfolio. They are AbbVie, Inc. (ABBV), Altria Group (MO), America's Car-Mart (CRMT), Bank of America (BAC), Berkshire Hathaway (BRK.A) (BRK.B), Clorox Company (CLX), Corning, Inc. (GLW), Goldman Sachs (GS), Hershey Co. (HSY), Otelco, Inc. (OTEL), Philip Morris Intl. (PM), Reading International (RDI), and the SPDR S&P 500 ETF (SPY).

The spreadsheet below highlights changes to Yacktman's 13F stock holdings in Q2 2018:

Donald Yacktman - Yacktman Asset Management - Q2 2018 Update

Disclosure: I am/we are long BAC, PM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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