Friday, February 3, 2012

Yacktman Funds 4Q 2011 Update

Here's an update from Donald Yacktman and his team on the funds they manage:*

The Yacktman Fund (YACKX) returned 10.63% per year over the past ten years.

The Yacktman Focused Fund (YAFFX) returned 11.39% per year over the past ten years.

For a comparison, the S&P 500 is up 2.92% per year over the same time frame.

At the end of the most recent quarter, both funds continued to hold substantial positions in large capitalization stocks with many being household names.

These funds are very similar but the more concentrated of the two funds, as the name suggests, is the Yacktman Focused Fund.

Top 5 Holdings of The Yacktman Focused Fund
1 Pepsi (PEP)
2 News Corp (NWSA)
3 Procter & Gamble (PG)
4 Microsoft (MSFT)
5 C.R. Bard (BCR)

Approximately 40% of the Yacktman Focused Fund portfolio is in the top 5 stocks. 

Top 5 Holdings of The Yacktman Fund
1 Pepsi (PEP)
2 News Corp (NWSA)
3 Procter & Gamble (PG)
4 Microsoft (MSFT)
5 Cisco (CSCO)

Approximately 35% of the Yacktman Fund portfolio is in the top 5 stocks. 

The annual turnover of these portfolios is typically less than 10%. That low turnover rate is impressive and, as far as I'm concerned, something not seen often enough.

Yacktman continues to have minimal exposure to financials (~5%) though some small new positions in banks were added last quarter (Goldman Sachs GS, State Street: STT, Northern Trust: NTRS and Bank Of America: BAC).

None of the recent bank purchases are large enough positions to be in the top 25.

Donald Yacktman was asked, in this recent interview with Consuelo Mack, about having added positions in financials after mostly avoiding them in recent years:

...in all cases, you'll notice they're very small positions, and we spread the risk. Sometimes, when things are less predictable, the way to deal with that is to have a smaller position and allow for a greater spread over what your normal hurdle rate would be, to allow for that uncertainty. - Donald Yacktman

The only bank that is a top 10 position is U.S. Bancorp (USB).

The following stocks purchased in the 4th quarter had a greater than 1% portfolio impact.

Stocks purchased
C.R. Bard
Avon Products (AVP)
Pepsi
Microsoft

There were no top 25 positions sold last quarter.

The two funds that Yacktman and his team manage have performed very well but what's even more notable, at least to me, is how they go about producing those returns.

One of the common phrases we use at our firm is, "It's almost all about the price". Often, the most important variable in having a successful investment and managing risk is the price paid for a security. - Donald Yacktman in the 3Q 2011 letter:

They've been able to outperform by generally buying shares of quality businesses with the best risk-adjusted returns and having the discipline to buy when selling at a nice discount.

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.

Established long positions in PEP, PG, MSFT, CSCO, USB at lower than recent prices
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