Don't Trust the Federal Reserve to Preserve Value: Current Large-Cap Value Investing Stock Picks from Donald Yacktman

Wall Street Transcript

67 WALL STREET, New York - October 9, 2012 - The Wall Street Transcript has just published its Large-Cap Investing Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Large Cap Investing - Value Investing - Long-Term Investing

Companies include: Procter & Gamble Co. (PG), Pepsico, Inc. (PEP), Microsoft Corporation (MSFT), Cisco Systems, Inc. (CSCO), Sysco Corp. (SYY), CR Bard Inc. (BCR), Clorox Corporation (CLX)

In the following excerpt from the Large-Cap Investing Report, one of the deans of value investing Donald Yacktman, discusses his current top picks:

TWST: In today's market environment, how easily are you finding large-cap value opportunities?

Mr. Yacktman: What's unique about today, based on over 40 years of experience, is the difference in forward rates of return is very narrow among various qualities of companies, so we don't see a lot of reason to downgrade quality. The starting point in long-term investing is the long-term U.S. Treasury bond, and that is, in my opinion, overvalued relative to what's out there.

Look at the history of the Federal Reserve in the last 100 years. It started in 1913. The dollar, which was worth 100 cents then, is now worth six cents and on its way to five. So we're going to have inflation, and the Fed has said their goal is 2% inflation.

Well, when you look at the rate of interest you get on long-term Treasuries, there is virtually no real return. When you look at a lot of these high-quality businesses, there's an enormous spread to fixed income, so on a relative basis they are quite cheap. In fact, you get several of these large companies that are in our top 10 holdings where the dividend exceeds the 30-year Treasuries. That hasn't happened very many times.

TWST: What are some of your favorite investment ideas today?

Mr. Yacktman: Procter & Gamble (PG), News Corp. (NWS) and Pepsi (PEP) are the top three. You also have companies like Microsoft (MSFT), Cisco (CSCO) and Sysco (SYY), C.R. Bard (BCR), Clorox (CLX).

TWST: Have you been making any significant changes to that top holding list or the weightings?

Mr. Yacktman: In a market that's relatively calm compared to, say, 2008, 2009, our turnover rate is quite low today, and usually is fairly low. Over a longer time period, I would say we have about a modest turnover rate.

TWST: Yacktman Asset Management has a bottom-up approach, but what macro factors concern you the most today?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

View Comments

Recommended for You