Tracking Yacktman Asset Management Portfolio - Q4 2018 Update

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Includes: ABBV, ABT, ACA, ANTM, AVP, BK, BRK.A, BRK.B, CHRW, CL, CLX, CMCSA, COP, CRMT, CSCO, CTSH, DIS, EAF, FOX, FOXA, GLW, GS, HSY, INFY, JNJ, KO, MO, MSFT, MU, 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 $8.34B to $7.84B this quarter.

Yacktman Asset Management increased State Street Corp., Goldman Sachs, and Amerco, while reducing Procter & Gamble and Infosys during the quarter.

Their largest five stakes are at ~58% 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 02/04/2019. 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 Q3 2018.

This quarter, Yacktman Asset Management’s (YACKX, YAFFX, YASSX) 13F portfolio value decreased ~6%, from $8.34B to $7.84B. The number of holdings remained steady at 43. The largest holding is Twenty-First Century Fox (FOX, FOXA) at ~17% of the 13F portfolio. The largest five individual stock positions are Twenty-First Century Fox, Procter & Gamble (PG), PepsiCo Inc. (PEP), Coca-Cola Company (KO), and Oracle (ORCL), and they together account for 58.02% 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. 23 of their stakes are significantly large (over ~0.5% of the 13F portfolio each) and they are the focus of this article.

Stake Decreases

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. There was another ~20% selling this quarter at prices between $79 and $97. The stock currently trades at $97.44, and it is their second-largest position at ~14% of the portfolio.

Infosys Ltd. (INFY): The 1.24% INFY position was established in Q2 2017 at prices between $7.10 and $7.90 and increased by ~60% the following quarter at prices between $7.10 and $8. The stock is currently at $10.84. The last five quarters have seen a combined ~15% selling at prices between $7 and $10.50.

Note: Infosys had a 2-for-1 stock split last September. The prices quoted above are adjusted.

Twenty-First Century Fox: FOXA is Yacktman’s largest 13F position at ~17% of the portfolio. They had a very small position in News Corporation (NWS) in 2008. The 2009-2012 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 in Q2 2018 at prices between $35.50 and $50. The last two quarters have seen only marginal activity.

Note: The stock is at $49.28, up ~70% in the last fifteen months. In December 2017, Walt Disney Company (DIS) agreed to acquire the film & 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 nineteen 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 $49.26, 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 in Q2 2018 at prices between $41.50 and $45. The last two quarters have seen only marginal activity.

Johnson & Johnson (JNJ): JNJ is a large 7.75% 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 ~$133. The last four years have seen a combined ~45% reduction at prices between $91 and $147.

Microsoft Corporation (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 5.10% of the portfolio stake was established in 2011, when ~20M shares were added at prices between $24 and $28.50. 2014-2016 saw an overall stake reduction of ~70% at prices between $36 and $63. The last two years have also seen a ~63% reduction at prices between $63 and $115. The stock currently trades at ~$107. Yacktman is harvesting long-term gains from this position.

Cisco Systems (CSCO): CSCO is a 3.41% 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 ~72% selling over the last five quarters at prices between $33 and $49. The stock currently trades at $47.26. Yacktman is harvesting gains from this position.

Anthem Inc. (ANTM) (previously Wellpoint Inc.): ANTM is a 2.50% 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 an ~18% selling at prices between $184 and $235. The stock currently trades at ~$304. The last two quarters have also seen minor trimming.

Stake Increases

State Street Corporation (STT), Goldman Sachs (GS), and Amerco (UHAL): These three positions saw large increases this quarter. The ~2% STT stake saw a ~150% increase at prices between $60 and $87. The stock currently trades at $70.91. GS is a ~0.80% stake that saw a similar increase at prices between $156 and $232, and it now goes for $198. The small ~0.70% UHAL position saw a ~25% increase during the quarter. For investors attempting to follow Yacktman, these are good options to consider for further research.

PepsiCo Inc.: The ~11% (top-three) PEP stake was built 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 ~$113. The six quarters through Q3 2016 had seen a roughly two-thirds reduction at prices between $91 and $111. Since then, the activity has been minor.

Oracle Corporation: The large (top-five) 7.89% 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 two years through Q3 2018 had also seen another one-third selling at prices between $38 and $53. The stock currently trades at $51.24. There was a ~3% stake increase this quarter.

Sysco Corporation (SYY): SYY is a 3.34% 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 $65.35. There was another ~40% reduction in Q2 2018 at prices between $58 and $68. Last quarter saw an ~8% trimming, while this quarter there was a ~3% stake increase.

US Bancorp (USB): The 2.85% USB position has been in the portfolio for over 15 years. The majority of the current stake was purchased in 2011 in the low-$20s price range. The stock currently trades at $51.48. 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. The four quarters through Q3 2018 had seen minor trimming, while this quarter saw a ~5% stake increase.

Exxon Mobil (XOM): XOM is a ~2% 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 well below that range at $75.59. 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. The six quarters through Q2 2018 had seen a combined ~12% reduction at prices between $72.50 and $91. The last two quarters have seen only minor activity.

The Bank of New York Mellon (BK): The ~2% 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 $52.62. The position was reduced by ~30% in Q4 2016 at prices between $39 and $49. There was minor trimming in the last four quarters, while this quarter saw a ~6% stake increase.

ConocoPhillips (COP): COP is a long-term ~1.80% position first purchased in 2007. It saw ~3% stake increase this quarter.

Wells Fargo (WFC): WFC is a 1.18% 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 $49.27. There was marginal trimming in the last seven quarters, while this quarter saw a ~5% stake increase.

Comcast Corporation (CMCSA): CMCSA is a 0.82% 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 $37.15. There was an ~8% stake increase this quarter.

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

Colgate-Palmolive (CL), Cognizant Technology (CTSH) and Corning Inc. (GLW): These very small (less than ~1% of the portfolio each) stakes saw minor increases 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 (2.17%), US Bancorp (2.75%), and Wells Fargo (1.18%). All three stakes were increased this quarter. The quarter also saw a ~2% stake build-up in State Street.

Note 2: Very small (less than 0.5% of the portfolio each) positions account for ~2% of the overall portfolio. They are Unilever NV (UN), Arcosa Inc. (ACA), Abbvie Inc. (ABBV), Abbott Laboratories (ABT), Altria Group (MO), America’s Car-Mart (CRMT), Avon Products (AVP), Berkshire Hathaway (BRK.A, BRK.B), C.H. Robinson Worldwide (CHRW), Clorox Company (CLX), GrafTech International (EAF), The Hershey Co. (HSY), Micron Technology (MU), Otelco Inc. (OTEL),Philip Morris International (PM), Reading International (RDI), the SPDR S&P 500 Trust ETF (SPY), and Stryker Corp. (SYK).

The spreadsheet below highlights changes to Yacktman’s 13F stock holdings in Q4 2018:

Donald Yacktman - Yacktman Asset Management - Q4 2018 13F Report

Disclosure: I am/we are long ABBV, 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.