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Mutual fund research: focus on the Yacktman funds

This weekend, I set up a profile on Jemstep (jemstep.com) with the following basic investor preferences:

Type of fund: stock fund
Style of fund: large cap value
Risk/return trade-off: medium
Fees: concerned about high fees
Investment horizon: 10 years

Based on these preferences, The Yacktman Fund (MUTF:YACKX) and the Yacktman Focused Fund (MUTF:YAFFX) were both ranked in the top ten by Jemstep, out of a possible 1554 choices falling within this category of fund. In fact, for my particular profile (I answered a few more detailed questions on Jemstep to render a complete profile), the Yacktman fund came up in the No1 spot, so I decided to take a closer look.

The Yacktman Funds are run by Donald Yacktman and his son Steve Yacktman, and have been around since 1992. The Yacktman fund and the Yacktman Focused fund are the only two funds within the Yacktman stable, and over the past decade both have made investors happy. One of the most impressive feats of these funds is how they have managed to side-step the two major bubbles of the last decade - the dot com bust of 2000 and the crisis of 2008 - and consistently outperform the S&P 500 when the going gets tough. Here are some performance metrics of the Yacktman Fund:

Total returns

One Year - 20.9%
Three Year - 7.67%
Five Year - 7.30%
Ten Year - 12.72%

Year on year returns vs S&P (%)

             YACKX  S&P
2009      59.31   26.5
2008     -26.05  -37
2007       3.39     5.61
2006      15.95  15.79
2005     -1.3       4.91
2004      9.93    12
2003     33.03   28.7
2002     11.41  -22.1
2001     19.47  -11.9
2000     13.46   -9.1

It’s not surprising then that Donald Yacktman was nominated by Morningstar as Fund Manager of the Decade (he lost to Bruce Berkowitz of Fairholme - ticker: FAIRX), and had been featured in major publications including Fortune Magazine (Catch a High Flying Fund, Nov 25 2009). But apart from these superb returns, it's worth looking at some other important metrics, such as risk and fees.

Risk

From a risk perspective, the fund is very solid when it comes to risk-adjusted returns. The Sharpe ratio is a measure of reward per unit of risk (risk-adjusted performance). A higher Sharpe ratio means the fund’s management achieved a higher return whilst taking on less risk (management made smart investment decisions). For the more sophisticated investors, the 3 year Sharpe Ratio of YACKX is 0.4 and the 5 year Sharpe Ratio is 0.28 - a very good risk adjusted performance relative to peers.

Fees

As indicated above, fees are of concern to me. At 0.93%, the expense ratio of YACKX is below the 1% “psychological” threshold which I am happy about, and is reasonable for an actively managed fund. 

Holdings

The Funds’ holdings are focused predominantly on high quality consumer companies, which Yacktman has a knack of snapping up at attractive valuations. The top ten holdings of YACKX are as follows:

Ticker Name %

1. NWS Newscorp Class B8.66
2. PEP Pepsico 8.18
3. KO Coca-cola 7.23
4. KOP ConocoPhillips 4.9
5. VIA BViacom B 4.69
6. CLX Clorox Co 4.61
7. PFE Pfizer 4.51
8. CMCSAComcast A 4.1
9. MSFT Microsoft 3.75
10. PG Proctor&Gamble3.14


If you’re looking to shore up your portfolio with a value fund focusing on high quality companies, both the Yacktman funds have track records that speak for themselves and are worthy of serious consideration. 

Action item for Jemstep beta users: why not type in the Yacktman Fund into search bar at the bottom of the results page on Jemstep, and see where the fund ranks for you?

*By way of disclosure, the writer bought and continues to own shares in the Yacktman Fund based on a previous recommendation by Jemstep.


Disclosure: Long YACKX