Donald Yacktman’s fund, Yacktman Focused, has climbed to new heights in the first quarter of 2012 adding no new companies to the portfolio but making some key increases in it’s holdings. The buys made in the period up to March were in several quarters such as household goods, like Johnson & Johnson (NYSE:JNJ), media companies, like Viacom Inc. (NYSE:VIA.B) and educational service providers, like the Apollo Group Inc. (NASDAQ:APOL). The fund’s portfolio is now worth $5.02 billion up from a 2011 close of $3.82 billion.
The only sell recorded in the period was of Total System Services Inc. (NYSE:TSS). Yacktman dropped all of its shares in that company, a holding of 1,000,000 shares. Total Systems is a company that specializes in payment solutions for financial institutions and other organization, mainly in North America but also around the world. The company is the leader in credit card processing and competes in the service with the likes of Visa Inc (NYSE:V), Mastercard Inc (NYSE:MA) and Fiserv, Inc. (NYSE:FIS).
Yacktman Focused bought all of its shares in the company in 2010 as a value stock. The firm’s shares had plummetted throughout the 2008 financial crisis peaking at just over $33 in 2007 and falling down to the 14-16 level in 2010. For most of the last quarter the shares have remained above $20 an have reached highs of over $23, a number it is now solidly at. That sale will have netted the fund a decent return and signaled a good move by Yacktman Focused on picking a stock at its low.
The fund did not pick up any new stocks in the first quarter but it did increase its holdings in a great deal. One of the biggest movers was Sysco Corporation (NYSE:SYY), a large firm in the food services industry. Focused increased its holdings of the firm by 96%. Yacktman has been picking up shares in the company since the first quarter of 2010 and Yacktman Focused now holds 9.8 million shares in the company, the largest investor holding in the firm. The company has had a busy first quarter, acquiring European Food Imports Ltd., a specialty food supplier in the Midwest and South and signing a deal with Dickey’s Barbecue, a fast growing restaurant chain, to provide the company with food service products. Yacktman isn’t the only manager holding on SYY, clearly it is a stock to watch going forward.
The biggest increase Focused made in any stock was with Clorox36 Co. (NYSE:CLX). The firm picked up almost 2 million shares of the cleaning products company more than tripling their previous holdings. Almost 4% of the entire Yacktman Focused fund is now made up of Clorox holdings. Clorox has been performing solidly recently. The stock has been particularly stable with a fifty two week range of just 63.06-75.44. A similar firm, The Procter and Gamble Company (NYSE:PG) makes up the largest single chunk of the fund’s portfolio.
At 12.72% of all stock held by the firm and a total of 9500000 shares of PG stock the company relies on stability in the household care giant and that it has certainly delivered. It has an even tighter range in the past than Clorox, 57.56-67-95 and the company’s history and product line don’t show signs of fracture any time soon. Likewise Johnson and Johnson (NYSE:JNJ) holdings in the fund were increased by 50% or 2.25 million shares. That company makes up almost 3% of the company’s stock and is another stable and reliable company due to its history and product range. The fund is holding these dividend paying company’s as a damper to moves on riskier stocks.
One of the riskier stocks added after December was Corning Incorporated (NYSE:GLW) the information technology operates throughout the technology sphere researching solutions to problems. Tech companies such as Corning are always risky as they operate with high sunk and fixed costs with no guarantee of performance. Focused added 600,000 shares in the company in hopes its new technological breakthroughs, including a new type of glass for displays, will be effective. Yacktman now holds 4.4 million shares in the company.
ConocoPhilips (NYSE:COP) has also been bought up by the company increasing its holding to 1.5 million shares and 2.27% of the company’s portfolio.. The company, which is an oil and gas giant, faces challenges in the future without a doubt. The company has split itself between natural gas and oil exploration and production, natural gas often being a complementary product of crude oil.
However the high price of oil has helped the company the disastrously low price of NatGas is not helping anyone in the industry. Some analysts are suggesting that the price could last for a long time and that the US will gradually move to a greater share of Gas powered vehicles and mahinery.
That future is anything but certain and the companies in the industry are sitting it out, many of them having to close production facilities as the prices get too low. The problem with a move to cheaper natural gas for ConocoPhilips is that greater consumption of one of its products will undoubtedly eat into its other product, and deliver lower returns. This provides a headache for investors and with an increase of 29.31% of the stock in the last three months Yacktman is no different.
Yacktman also continued to increase its stock in several company’s it has been buying for quite a while. The fund increased holdings in PepsiCo. Inc. (Nyse:PEP) to 8.5 million shares, the Apollo Group Inc. (NASDAQ:APOL) up to 2 million shares, Bard to 2.85 million shares, NewsCorp up to 29 million shares and Viacom B up to 3 million shares. The fund also bought in previously held State Street Corp. and Avon Products Inc.
With no new companies added to the roster and only one sell in the first quarter it seems to have been a wait and see period for the fund. Most of the stocks added were in companies Yacktman Focused had already invested large amounts in and were already large parts of the portfolio. It may not be the worst time to be cautious buying like Yacktman was last quarter. The market is still unsure about the way the recovery is going to go and judging by the financial’s earnings and the market’s reaction to them that problem still has not been solved.
You could certainly find worse to listen to than Donald Yacktman. His funds, Yacktman and Yacktman focused beat the odds last year and finished in the top 5% of performers in a year when so many hedge funds died. He has been beating his peers year on year for a decade. Yacktman Focused’s moves in the first quarter look to me like that of a fund that sees the tide turning but is not sure which dorection it is going. The fund bought more or less safe stocks during the quarter and left aside riskier options, but did not sell on them.
A slow quarter no doubt but one that bears thinking about going forward. Yacktman Focused is likely to continue to add to the assets under its management in the next quarter and the fund is certainly going to keep the attention of commentators. Performance like Yacktman’s cannot be faked, and Yacktman is certainly the real deal.
