News Corp (NWSA), PepsiCo, Inc. (PEP): What’s This Mega-Investor Buying?


PepsiCo, Inc. (NYSE:PEP) is the next on the list, with a value of $1.8 billion versus $1.6 billion for the end of 2012. Up 21% year-to-date, PepsiCo, Inc. (NYSE:PEP) recently announced its 41st consecutive dividend increase to $2.27 per share, from $2.15, and it said that it forecasts a 7% core constant currency EPS increase for FY2013.

A bottle redesign and a revamped marketing program are a couple key points that bulls expect to drive revenues moving forward, and a strategic alliance with China’s Tingyi will only help Pepsi’s battle in the Far East. Though many investors would likely go with The Coca-Cola Company (NYSE:KO) over PepsiCo, Inc. (NYSE:PEP) due to the former’s sheer size, Pepsi’s actually a better value at the moment, trading at 1.9 times sales and 16.9 times forward earnings. The Coca-Cola Company (NYSE:KO), meanwhile, sports sales and forward EPS metrics that are 47% more expensive than PepsiCo, Inc. (NYSE:PEP), on average. It’s understandable why an investor like Yacktman would be bullish on the value potential.

The best of the rest

Yacktman Asset Management also disclosed a $1.2 billion stake in Microsoft Corporation (NASDAQ:MSFT), at 41,348,690 shares, up from 29,851,815 shares worth some $797.9 million posted in the previous filing. Still in hedge funds’ top ten picks on an aggregate basis, investors in Microsoft Corporation (NASDAQ:MSFT) are finding themselves in an interesting predicament. On one hand, shares are up more than 30% year-to-date, but the PC market’s prospects are looking increasingly dim over the long run. For the first three months of 2013, Microsoft posted a 20% increase in diluted EPS (to $0.72 per share) and announced a dividend of $0.23 per share.

Another tech pick, Cisco Systems, Inc. (NASDAQ:CSCO), represented a $1.1 billion position for the hedge fund at the end of the first quarter. The amount of shares remained almost unchanged the previous holding representing 52,443,161 shares, worth $1.0 billion. In its fiscal third quarter of 2013, Cisco Systems, Inc. (NASDAQ:CSCO)’s net sales grew by 5.4% to $12.2 billion year-over-year, while earnings growth of 14.5% was above Wall Street’s long range annual estimates (8.3%). Cisco bought back about 41 million shares during the third quarter of FY2013, worth $860 million. Cisco plans to buy back some $4.3 billion worth of shares under its current repurchase program, so we’ll continue to watch Yacktman’s investment in the tech giant.

Final thoughts

Like most of his hedge fund peers, Donald Yacktman holds a variety of stocks in his equity portfolio, as evident by looking at his favorite five picks. Giants Microsoft and Cisco round out the list, and give Yacktman exposure to value in the tech sector, while PepsiCo is slightly more attractively priced than rival Coca-Cola. Procter & Gamble’s potential for restructuring is worth watching, and News Corp (NASDAQ:NWSA) upcoming spinoff of 21st Century Fox gives investors two intriguing plays in media for the remainder of 2013.

Disclosure: none