Yacktman Asset Management Lp is a $17 billion mutual fund management firm founded by Donald Yacktman in 1992. One of the known products of the firm is the Yacktman Focused Fund which had returned 12 percent within the past five years making it one of the top performers within its category. A good look at the moves of such huge management firms can provide investors with insights for a good mix of stocks to consider.
In the fourth quarter of 2012, the Austin-based firm initiated only 2 new positions and increased shares in 28 stocks. The five biggest buys are Stryker Corporation (NYSE:SYK), The Coca-Cola Company (NYSE:KO), Dell Inc. (NASDAQ:DELL), Avon Products, Inc. (NYSE:AVP), and PepsiCo, Inc. (NYSE:PEP). Yacktman had sold out 3 stocks and reduced positions in 20 including Research In Motion Limited which the firm had strongly backed in the past. Here’s a closer look at the biggest buys of Yacktman in the fourth quarter.
Sources: Finviz.com and whalewisdom.com; as of February 5, 2013
Stryker Corporation (NYSE:SYK).
The fund manager bought yet another significant amount of shares in Stryker. The 24-percent increase in the holding in the fourth quarter brought the total position to over 12.064 million shares, which represented roughly 4 percent of Yacktman’s total portfolio. The fund manager has not sold any part of its holding of Stryker within at least in the last 2 years.
The medical device maker’s stock price has been performing robustly in recent months. The company has had encouraging revenue performance in the fourth quarter. In fact, quarterly revenue grew by 5 percent, with organic growth nearly 6 percent. Its expansion in China will definitely come into play and will give the company an even better growth prospect. Also, investors favor this stock for its impressive dividend record. The dividend amount has just been raised from 21 to 26.5 cents. Stryker’s dividend growth had averaged over 40 percent since 2006.
The Coca-Cola Company (NYSE:KO)
Yacktman also purchased an additional 23 percent of shares in Coca-Cola, bringing the total position to over 16.584 million shares or 3.6 percent of the firm’s total portfolio. This is by far the largest buy in Coca-Cola that the firm has had within at least the past 2 years.
The Coca-Cola Company has posted positive earnings surprises three times in 2012 and its long term growth estimate of over 8 percent is encouraging. Likewise, KO is able to maintain its high net margin. If there is anything that can potentially dampen an investor’s spirit with Coca-Cola, it’s the dividend payment that reverted back to its level 9 years ago. The dividend amount has been excellently going the upstream direction for the past decade or so reaching $0.51 then suddenly dropping to about half at $0.255. But given the landmark company’s good fundamentals and encouraging growth prospect, I believe that Coca-Cola can live up to its name and credibility when it comes to paying its investors stable dividends. For one, the payout ratio is still at a fair level of 51.17%, which is not very different from its historical ratio of 50.65%.
Dell Inc. (NASDAQ:DELL)
Yacktman initiated a position worth over $151 million in Dell in the fourth quarter. The fund manager is noted to have sold all its former shares in Dell in the second quarter of 2011. The latest purchase is, I believe, in anticipation of a buyout that would take the company private. As of publication time, Michael Dell is reported to be nearing a $23 billion deal with Microsoft and Silver Lake Partners, a private-equity firm, to offer its shareholders $13.50 to 13.75 per share. This will give Mr. Dell the largest position in the company. If successful, it would be the biggest tech leveraged buyout since the financial meltdown. It is also a big move for Mr. Dell in his goal to reposition the company he has founded for the new era. The stock price has been performing robustly in recent months. Currently, the P/E is estimated at 9.03 with a PEG of 1.04.