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Yacktman Fund's Top 5 1st-Quarter Trades

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GuruFocus.com
·5 min read
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- By James Li

The Yacktman Fund (Trades, Portfolio), part of Austin-based Yacktman Asset Management (Trades, Portfolio), disclosed late last week that its top five trades during the first quarter included a reduction in its Macy's Inc. (NYSE:M) holding and new buys in the following four companies: Canadian Natural Resources Ltd. (NYSE:CNQ), Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), Northrop Grumman Corp. (NYSE:NOC) and Lockheed Martin Corp. (NYSE:LMT).


Managed by Stephen Yacktman and Jason Subotky, the fund seeks long-term capital appreciation through investments in the common stock of companies that have good value and growth potential. Emphasis is placed on three factors: good business, shareholder-oriented management and low purchase price. The fund said in its fourth-quarter 2020 letter that it returned 20.46%, outperforming the Russell 1000 index return of 16.25%.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

As of March 31, the fund's $7.11 billion equity portfolio contains 58 stocks, with eight new positions and a turnover ratio of 8%. The top four sectors in terms of weight are consumer staples, communication services, technology and financial services, representing 20.95%, 19.97%, 18.60% and 12.36% of the equity portfolio.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Macy's

The fund sold 8.7 million shares of Macy's (NYSE:M), axing 63.04% of the position and 1.54% of the equity portfolio. Shares averaged $15.26 during the first quarter; the stock is modestly overvalued based on Monday's price-to-GF Value ratio of 1.19.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

The fund said in its letter that Macy's share price nearly doubled during the fourth quarter of 2020 as Covid-19 vaccine progress increased the possible return to a "more normal environment" during 2021.

The New York-based omnichannel retailer said in its fiscal 2020 annual report that net sales for the 12 months ending January 2021 declined approximately 29.4% from fiscal 2019 sales, driven primarily by lower comparable stores during the first and second quarters of fiscal 2020. Despite the pandemic lowering foot traffic in brick-and-mortar stores, digital sales as a percentage of net sales surged to 44.3% in fiscal 2020 compared to 25.3% for the 12 months ending January 2020.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

GuruFocus ranks the retailer's financial strength 3 out of 10 on several warning signs, which include a low Piotroski F-score of 3, a weak Altman Z-score of 0.75 and a debt-to-equity ratio that underperforms over 90% of global competitors.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

The Yacktman Focused Fund (Trades, Portfolio) also reduced its holding in Macy's.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Canadian Natural Resources

The fund purchased 4,295,331 shares of Canadian Natural Resources (NYSE:CNQ), giving the position 1.86% weight in the equity portfolio. Shares averaged $27.6 during the first quarter; the stock is modestly overvalued based on Monday's price-to-GF Value ratio of 1.17.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

GuruFocus ranks the Calgary, Alberta-based energy company's profitability 6 out of 10 on the back of net margins and returns outperforming more than 56% of global competitors. Despite this, the company's financial strength ranks 3 out of 10 on the back of a low Altman Z-score of 1.28 and a debt-to-equity ratio that underperforms over 60% of global energy companies.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Other gurus with holdings in Canadian Natural Resources include Pioneer Investments (Trades, Portfolio) and Steven Cohen (Trades, Portfolio)'s Point72 Asset Management.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Berkshire Hathaway

The fund purchased 340,000 Class B shares of Berkshire Hathaway (NYSE:BRK.B), giving the position 1.22% weight in the equity portfolio. Shares averaged $242.84 during the first quarter; the stock is fairly valued based on Monday's price-to-GF Value ratio of 1.08.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Co-managed by Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio), the Omaha, Nebraska-based insurance conglomerate seeks investments in "good companies with fair prices" according to a four-criterion investing approach.

GuruFocus ranks Berkshire's profitability 7 out of 10 on several positive investing signs, which include net profit margins and returns outperforming over 70% of global competitors.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Northrop Grumman

The fund purchased 225,000 shares of Northrop Grumman (NYSE:NOC), giving the position 1.02% weight in the equity portfolio. Shares averaged $301.43 during the first quarter; the stock is fairly valued based on Monday's price-to-GF Value ratio of 0.92.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

GuruFocus ranks the Falls Church, Virginia-based aerospace and defense company's profitability 9 out of 10 on several positive investing signs, which include profit margins and returns outperforming over 80% of global competitors.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Lockheed Martin

The fund purchased 195,000 shares of Lockheed Martin (NYSE:LMT), giving the position 1.01% weight in the equity portfolio. Shares averaged $342.99 during the quarter; the stock is fairly valued based on Monday's price-to-GF Value ratio of 0.93.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

GuruFocus ranks the Bethesda, Maryland-based aerospace and defense company's profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and profit margins and returns outperforming over 78% of global competitors.

Yacktman Fund's Top 5 1st-Quarter Trades
Yacktman Fund's Top 5 1st-Quarter Trades

Disclosure: No positions.

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This article first appeared on GuruFocus.