Donald Yacktman’s Top Five Picks: News Corp (NWSA), PepsiCo, Inc. (PEP), SYSCO Corporation (SYY)

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SYSCO Corporation (NYSE:SYY) is the largest North American distributor of food and food related products to the “food-prepared-away-from-home” industry. The company’s customers include restaurants, healthcare and educational facilities. Margins have been narrow lately, with EPS for 4Q 2012 coming in at $0.40, compared to $0.43 for the same quarter last year. This comes as increases in labor, fuel and food costs have risen over the past year. Some of the other headwinds for the company includes the fact that the majority of SYSCO Corporation (NYSE:SYY) sales are to restaurants, which are more sensitive to unemployment and declines in consumer discretionary spending.

Yacktman’s tech bet

Cisco Systems, Inc. (NASDAQ:CSCO) is Yacktman’s fourth largest holding as of the end of 2012, and he notes that the “shares continue to be inexpensive as investors generally are avoiding ‘old tech’ shares.” Cisco has a very strong balance sheet, with around $40.2 billion in cash, while debt is negligible.

Despite concerns over a declining PC market, Cisco is the largest player in the networking space. Infonetics has Cisco as the market leader in the enterprise routing segment with 75% of the market share, and a leader in WLAN (50% of the market).

With a robust cash position and leading market share, Cisco recently upped its dividend payment by 75% in an effort to reward shareholders; it’s now paying a dividend yield of 2.5%. Cisco is one of the top ten stocks loved by hedge funds (see all 10 here).
Don’t be fooled

Yacktman has a lot of faith in News Corp, with over 12% of his portfolio invested in the media company, and while I think the story is compelling, I don’t have that much conviction in the stock and believe that Disney could be a better bet (see why). As far as his consumer staple bets, they all appear to be solid bets for a sluggish economy, but as the economy shows signs of rebounding I would be weary of being over exposured to these stocks. However, I would consider P&G as a blend of a consumer staple and turnaround investment. I believe that Cisco has been dragged down due to the declining PC market, but I also believe that Cisco is more insulated than other major tech companies and is being unfairly pressured.

The article Donald Yacktman’s Top Five Picks originally appeared on Fool.com and is written by Marshall Hargrave.

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