Donald Yacktman and his team have a very solid long-term track record. Over the past ten years the cumulative return of the S&P 500 is 15% while both of the Yacktman Funds (YAFFX & YACKX) are up more than 200% over the same time frame.
At the end of the most recent quarter, Yacktman continued to hold and build positions in large capitalization stocks that are household names. These are relatively concentrated portfolios with ~35-40% in the top 5 stocks depending on the fund.
Top 5 Holdings
1 News Corp (NWSA)
2 Pepsi (PEP)
3 Coca-Cola (KO)
4 Microsoft (MSFT)
5 Procter & Gamble (PG)
So 3 of the top 5 are consumer staples. There's also minimal exposure to financials with only 1 bank in the top 25 (U.S. Bancorp: USB). Here are some thoughts on technology stocks from the Yacktman Funds 4Q 2010 Letter:
Technology
Last year the technology index rose more than 10%, however a few of the larger, more established companies like Microsoft and Cisco Systems declined. The technology sector typified the general investment environment last year, where more "exciting" stories generally performed better than more stable, established value. We think that will reverse sometime soon.
Microsoft's shares declined modestly last year even though the company produced exceptional operating results. Today the shares sell at about 10 times earnings and free cash flow per share after netting out excess cash on the balance sheet. We believe Microsoft has solid growth ahead and its shares are extremely inexpensive.
In the fourth quarter, we purchased a small position in Cisco Systems, another former tech‐bubble darling which now has a value‐priced stock. Since 2000, Cisco's shares have fallen more than 75% from their peak even though the sales and earnings per share of the business have more than doubled. The company has a strong balance sheet and solid management and sells for approximately 12 times 2011 earnings after adjusting for net excess cash.
At the very least, it's worth noting that value-oriented managers like Yacktman (who wouldn't touch a tech stock a decade ago due to extreme overvaluation) are moving into the Microsoft's and Cisco's of the world.
Adam
Long positions in PEP, KO, MSFT, and PG
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This site does not provide investing recommendations as that comes down to individual circumstances. Instead, it is for generalized informational, educational, and entertainment purposes. Visitors should always do their own research and consult, as needed, with a financial adviser that's familiar with the individual circumstances before making any investment decisions. Bottom line: The opinions found here should never be considered specific individualized investment advice and never a recommendation to buy or sell anything.
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Applying Newton's Fourth Law
Origin of Newton's 4th Law?
"Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett
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Find good businesses; buy at nice discounts to value; stay within limits & stick to what's understandable (necessarily unique for each investor); minimize trading, frictional costs, & errors of all kinds.
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A temperamental market pretty much assures it.
Those with a long investing horizon, it's worth noting, actually benefit from lower stock prices in the near-term (though not many market participants seem willing to put this truism to effective use). Those who attempt to profit primarily via speculating on short-term price action likely won't find this way of thinking to be of much interest.
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This site's emphasis? Put simply, it's on finding and buying -- with the long-term in mind -- good businesses at a plain discount to conservatively estimated value; it's on selling shares of those well-bought high quality business reluctantly. The view here is that selling makes sense only when core economics become permanently impaired, prospects have been misjudged, market price not just somewhat but, instead, meaningfully exceed per share intrinsic value, or opportunity costs are high. Buy/sell decisions aren't just an opportunity to increase returns; they're also an opportunity to make mistakes. It's easy to overemphasize the former and forget the latter. The focus here is on minimizing trading, frictional costs, and errors of all kinds; it's on staying comfortably within realistically assessed limits. First and foremost is the view that an investor should never make a specific investment based upon what someone else thinks. In other words, what makes sense to own is necessarily unique for each investor and it'd be unwise to not act accordingly. So, more generally, this site simply attempts to better understand some useful principles and ideas in context of investment. It's about, in a practical sense, what tends to work over the long haul as well as what, at times, gets the investor into trouble. It's not about grand theories in finance and economics. These too often distract from what matters or, worse yet, lead to costly misjudgments. As a result, they are mostly viewed with a healthy dose of skepticism here. Otherwise, the best thinking across disciplines should be learned well then put to good use in a way that's uniquely suitable.
About
Notable Quote
"Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions.
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger