Friday, February 17, 2012

Donald Yacktman On Stocks

Below is the 10-year performance through 12/31/11 of the funds that Donald Yacktman and his team manage:

The Yacktman Fund (YACKX) had a cumulative 10-year return of 174.52%.*

The Yacktman Focused Fund (YAFFX) did even better returning a cumulative 194.07% over the past 10 years.

For a comparison, the S&P 500 was up 33.35% over the same time frame.

From the latest letter:

Old Tech
Last year, the shares of many more established technology companies were out of favor, allowing us to increase our weighting to a group which we call "old tech". At the end of 2011, Microsoft and Cisco were our largest "old tech" positions...

Consumer Staples
These businesses tend to be fairly stable and predictable, with a strong ability to handle uncertain economic periods. We reduced our weightings in Coca‐Cola and Clorox during the year due to their strong price performance.   

Consuelo Mack recently interviewed Donald Yacktman. Some excerpts from that interview:

High Quality, Profitable Businesses
I've been doing this for over 40 years, and I can't remember another period of time where I've seen so many high-quality, profitable businesses selling at prices relative to the market this cheaply.

Behaving Like a Bond Buyer
...what we're seeing now is, in effect, the so-called AAAs of equity, things like Coke and Pepsi and things like that, have these very high returns, relative to other things. And so, why would one go to lower grades when they can stay with these so-called AAA-type bonds? Only they're really equities.

Beach Balls Pushed Underwater
Conceptually, what we're doing is buying beach balls being pushed underwater, and the water level is rising. And so, if one has the patience to stay with that, then eventually the pressure will come off, and the longer it takes, because the water level's rising, the more the bounce will be. 

The full interview with Donald Yacktman is certainly worth checking out.

The top holdings in the funds managed by Yacktman at year-end include Pepsi (PEP), News Corp (NWSA), Procter & Gamble (PG), Microsoft (MSFT), and Cisco (CSCO).

Adam

* From the letter: The performance data quoted for The Yacktman Fund and The Yacktman Focused Fund represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that the investor's shares, when redeemed, may be worth more or less than their original cost. The current performance may be higher or lower than the performance data quoted.

Interview with Donald Yacktman
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