Here's What This 270% Gainer Is Buying

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At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean that we don't pay attention to what leading fund managers are buying and selling. Mutual funds, which aren't always in lockstep with the broader market, can be a particularly valuable source of insight.

Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Securities and Exchange Commission Form 13-F. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although the form doesn't disclose the manager's short positions or the manager's intraquarter trades, it can shine a bright light on his or her "long" stock bets. To help us make use of 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that tracks hedge fund and institutional public disclosures and develops investment strategies based on them.

Q2 2011 update
Donald Yacktman founded Yacktman Asset Management in 1992. He isn't as well-known as investors such as Buffett, Soros, Berkowitz, and the like, but his track record is right up there with them. Yacktman is a value investor, aiming to achieve the highest possible risk-adjusted long-term returns on his investments.

Why should you look at Yacktman Asset Management's moves? Well, according to AlphaClone's back-test simulation, anyone who invested in Yacktman Asset Management's 10 largest long positions at the time they were disclosed publicly each quarter would have returned 270% since 2000, versus just 2.5% for the S&P 500 (including dividends) as of Sept. 1. (Note that this data reflects the holdings of the overall Yacktman Asset Management company, and not necessarily any one of its mutual funds.)

The total market value of Yacktman Asset Management's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data are available -- was $9.5 billion across just 58 holdings. The fund company's 10 largest positions and associated changes in number of shares held as of June 30, 2011 were:

News Corp. (NYS: NWS)  -- increased 13.5%.
PepsiCo (NYS: PEP)  -- increased 3.1%.
Procter & Gamble (NYS: PG)  -- increased 19.4%.
Microsoft (NAS: MSFT)  -- increased 20.2%.
Coca-Cola (NYS: KO)  -- increased 4.3%.
Cisco Systems (NAS: CSCO)  -- increased 168.8%.
Johnson & Johnson (NYS: JNJ)  -- increased 13.8%.
Viacom (NYS: VIA.B)  -- increased 4.4%.
Sysco (NYS: SYY)  -- increased 12.5%.
Pfizer (NYS: PFE)  -- increased 2.8%.

During the quarter, the fund family increased its positions in nearly 30 stocks. Among the stocks that it reduced its exposure to were Leucadia National and Kraft Foods. It also sold out of some stocks entirely, such as Dell and SLM. The Dell sale is particularly puzzling, as the company has seemed very undervalued to many, and has been aggressively buying back its own stock. It may simply be that the Yacktman team found more compelling buys.

Selected Q2 2011 commentary
Yacktman Asset Management has about 30% of its assets in the services sector and about 27% in consumer staples companies. Technology companies make up about 17% of assets, up from 10% just a few quarters ago -- probably because so many have been trading at bargain levels lately. The company's stake in health-care concerns has fallen a bit in recent quarters.

Here's where the firm is winning and losing currently and making new bets:

Recent winner
Food-service distribution giant Sysco was a big winner over the quarter, rising 13.5%. Its profits have been challenged by rising food costs, but the company has been investing in technology to make it more efficient. In the meantime, it still dominates its niche and has long been a solid dividend payer. The company has a five-star (out of five stars) rating at Motley Fool CAPS.

Recent loser
Fiber optic titan Corning (NYS: GLW) shed 12% of its value during the quarter, but its profit margins remain robust. Although it hasn't been selling as much glass for LCD monitors as it hoped, Corning has high hopes for its Gorilla Glass. The company has a five-star rating in Motley Fool CAPS.

New bets
The company's newest addition, Research In Motion, comprises a little less than 1% of the total portfolio. Some might wonder about the wisdom of this, given the BlackBerry maker's tough struggles against strong smartphone competitors. Others, though, simply see the stock as too cheap to ignore. Though it's not the one to beat in the consumer realm, BlackBerries are still very strong in the business arena.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.

Have any thoughts on this fund company or its holdings? Leave a comment below!

At the time this article was published Longtime Fool contributor Selena Maranjianowns shares of Corning, Microsoft, PepsiCo, Johnson & Johnson, Coca-Cola, and Procter & Gamble, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Coca-Cola, Johnson & Johnson, PepsiCo, and Microsoft. The Fool owns shares of and has created a bull call spread position on Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of Cisco Systems, Sysco, Coca-Cola, Microsoft, Johnson & Johnson, Procter & Gamble, Dell, PepsiCo, Corning, and Pfizer; as well as creating a bull call spread position in Microsoft and diagonal call positions in Johnson & Johnson and PepsiCo. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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