Here's What This 175% Gainer Is Buying
Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Donald Yacktman, who 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 return on his investments. According to the folks at GuruFocus.com, Yacktman gained about 175% cumulatively over the past decade, compared with just 35% for the S&P 500.
The Yacktman portfolio totaled about $14.6 billion in value as of March 31, 2012, with 63 holdings. The portfolio's top three holdings, representing almost a third of its asset value, are PepsiCo, News Corp., and Procter & Gamble.
So what does Yacktman's latest quarterly 13F filing tell us? Here are a few interesting details:
There were just two new holdings -- Tesco plc and Staples (NAS: SPLS) . Staples has been performing relatively well lately, despite the recession's pressures on it. It has also quietly become a top Internet retailer, with online sales soaring to $11 billion annually. Staples has been buying back its own shares, upping its dividend, and grabbing market share from competitors. Some think the company may benefit even more by focusing more on electronics.
Among holdings in which Yacktman increased its stake were Corning (NYS: GLW) and Sysco (NYS: SYY) . Glass and fiber-optics giant Corning has suffered some lately, with LCD TVs not selling as briskly as many had hoped, but its future still seems bright. Corning's Gorilla Glass is finding its way into many millions of smartphones and iDevices, and LCD TV sales are expected to grow faster soon. In addition, Apple's iTV is in the works, and may well feature Corning glass.
Food distribution titan Sysco has been hurt by rising fuel costs, and by the lackluster economy. But the economy is showing signs of life lately, and that means people will be eating out more often, which will be good for Sysco's business. Rising food prices may also put pressure on profits, but shareholders can still rely on the company's solid dividend, recently about 3.8%.
Yacktman reduced its stake in several companies, such as Paychex (NAS: PAYX) . High national unemployment hasn't been great for this cutter of paychecks, but employment should recover in the coming years, boosting Paychex. In the meantime, patient investors are enjoying a 4.3% dividend yield and one that's growing at a good clip, too (more than 8% annually over the past five years). Competition has been stiff for Paychex, but its operating margins still top those of its rivals.
Finally, Yacktman entirely unloaded electronic payment processor Total System Services (NYS: TSS) . That move may be largely due to valuation concerns, as the company's current price-to-earnings ratio is above its five-year average, and its forward P/E tops that of the S&P 500. On the plus side, the company's revenue and earnings growth rates have picked up in the past year.
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. 13F forms can be great places to find intriguing candidates for our portfolios.
If you're looking for ways to profit from the booming demand for tablets and smartphones and would like to consider candidates other than Corning, check out our special free report, "The Next Trillion-Dollar Revolution" -- which names names.
At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, owns shares of Procter & Gamble, Paychex, Apple, Corning, and PepsiCo, 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 PepsiCo, Staples, Apple, and Corning.Motley Fool newsletter serviceshave recommended buying shares of Procter & Gamble, Sysco, Paychex, Corning, PepsiCo, Apple, Staples, and Tesco; as well as creating a bull call spread position in Apple, writing a covered straddle position in Paychex, and creating a diagonal call position in PepsiCo. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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