[Question]: Mr. Yacktman, how did you become a value investor? Any books or people that influenced your investing philosophy? Any recommended readings to young investors?
[Mr. Yacktman]: I studied economics as an undergraduate and went to Harvard Business School. I enjoyed analyzing businesses and thought I had a patient and objective temperament which was well-suited for a successful investment career. It always made sense to me that good investing was about purchasing things on sale.
For reading, Ben Graham’s Security Analysis, Berkshire Hathaway Annual Reports, and John Train’s The Money Masters are all good. I would also recommend Poor Charlie’s Almanack.
[Question]: How do you think about PepsiCo’s long-term growth potential? Are you concerned about the potential for value destruction as management continues the push towards “Good for You” products (the JV with Mueller in yogurt that was discussed in October of last year comes to mind)?
[Mr. Yacktman]: PepsiCo has a diverse group of food and beverage businesses that offer a high degree of predictability and have solid growth potential over time. The long-term growth potential comes in large part from continued international expansion and product innovation. Management has a mixed track record with its “Good for You” strategy and its recent acquisitions. We believe the company will need to show improved results from several of the key areas of strategic focus or there may be a new management team in place in the near future. The potential for the stock is less about the growth, which we think is mid-to high single-digit per year, and more about the combination of valuation and quality of business.