Yacktman Funds Trims Most Positions, Adds to 2 Stocks, Buys S&P 500 ETF in 4th Quarter
- By Holly LaFon
Yacktman Asset Management, founded by noted value investor Donald Yacktman (Trades, Portfolio), purchased a smidgeon of the Standard and Poor's 500 index (SPY) and made significant increases to its holding of Unilever NV (UN) and Reading International Inc. (RDI).
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The intrinsic value of UN
Yacktman's $8.5 billion firm is currently led primarily by Stephen Yacktman, who acts as chief investment officer. As disciplined and risk-avoidant investors, their approach to stock selection hinges on three criteria: good business with dominant industry positions, shareholder-oriented management and low purchase price. The company has long upheld the motto, "It's almost always about the price."
"As always, we will wait for the right price, because a low price helps maximize reward and manage risk," the firm wrote in its third-quarter commentary. "In the meantime, we will be patient. We think Steve Jobs said it best in his Stanford Commencement address in 2005, 'If you haven't found it yet, keep looking. Don't settle.' We take good ideas from anywhere, even if it means quoting the co-founder of Apple when Samsung is one of our most important positions."
Managers often structure the portfolios with ample cash, which approached 20% of the AMG Yacktman Fund (Trades, Portfolio) (YACKX) at third quarter-end, its highest level since 2014, as inexpensive securities become scarce. The diverse portfolio spans 44 stocks, with the top five positions - Procter & Gamble (PG), Twenty-First Century Fox (FOXA), PepsiCo Inc. (PEP), Oracle Corp. (ORCL) and Cisco Systems Inc. (CSCO) - dominating more than 50%. The remaining smaller positions round out the lower half.
Yacktman's SPDR S&P 500 (SPY) position ranks as its fifth smallest. Firm managers purchased 10,380 shares of the market index - the most they have held in five years. The S&P 500 traded for an average price of $219 per share for the fourth quarter.
Reinforcing its interest in the consumer defensive sector, which composes 36% of holdings, Yacktman increased its position in Unilever NV (UN) by 1,168,035 shares. After the buy, it held 3,472,912 shares of Unilever, representing a 50.68% increase and 1.28% of holdings. The stock traded for an average price of $41 for the fourth quarter, its lowest average price since 2014. Yackman had been reducing the position incrementally over recent quarters at higher prices.
Unilever is an expansive consumer goods company, with a market cap of $122.75 billion. Its shares traded around $40.58 Tuesday afternoon, with a P/E ratio of 20.74 and P/S ratio of 2.03. The trailing 12-month dividend yield of Unilever is 3.44%. The forward dividend yield is 3.51%. Unilever had annual average earnings growth of 3.40% over the past 10 years.
After starting its Reading International position in the previous quarter, Yacktman increased its position in Reading International Inc. by 29.91% in the fourth quarter, adding 5,526 shares for a total of 24,000. Reading traded with an average price of $15.
Reading International is a diversified cinema and real estate company with a $522.36 million market cap. Its shares traded around $16.32 Tuesday afternoon with a P/E ratio of 31.37 and P/S ratio of 1.42. Reading International had annual average earnings growth of 15.40% over the past 10 years.
On the opposite side of portfolio activity, Yacktman reduced 39 of its positions and eliminated three: Raven Industries Inc. (RAVN), Valmont Industries Inc. (VMI) and Lancaster Colony Corp. (LANC).
See Donald Yacktman (Trades, Portfolio)'s portfolio here.
This article first appeared on GuruFocus.
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The intrinsic value of UN
