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Oracle Corporation (ORCL), Exxon Mobil Corporation (XOM), The Procter & Gamble Company (PG): Billion-Dollar Fund Gets Offensive

Oracle Corporation (NASDAQ:ORCL)Yacktman Asset Management’s suite of funds manages some $20 billion, and per its recent 13F filing with the SEC, which reveals the funds’ public equity holdings, it’s making a big bet on a tech giant.

Donald Yacktman, founder of Yacktman Asset Management, prides himself on being stock-picker, one that keeps his emotions at bay and uses the Internet for researching companies, purposely avoiding any contact with management to ensure an unbiased opinion.

Yacktman has his top-three stock picks as relatively defensive companies, but he recently went on the offensive, adding Oracle Corporation (NYSE:ORCL) to his portfolio. Oracle now makes up 2.9% of Yacktman’s public equity portfolio.

Oracle Corporation (NYSE:ORCL) is expected to see revenue up some 6% in both fiscal 2013 and 2014, thanks to the company’s move from hardware to software. The stock is relatively flat year-to-date and trading at only 14.5 times earnings.

Oracle Corporation (NYSE:ORCL)’s last fiscal quarter earnings showed a decline in revenue that pushed the stock’s price down 14% that week, however, it offered a great buying opportunity. The “poor” quarterly results were part of Oracle’s transition from a hardware business to a software business, a long-term positive.

Oracle is helping facilitate its move to software as a service business with several acquisitions. In 2012, it snatched up RightNow for $1.5 billion and Taelo for $1.9 billion. More recently, Oracle Corporation (NYSE:ORCL) bought Eloqua for $900 million in January. Gartner believes revenue from worldwide SaaS (software as a service) will reach $22 billion in 2015 from $14.5 billion in 2012.

One of the reasons I like Oracle Corporation (NYSE:ORCL) is its dominant position in the enterprise software market. This includes its cloud platform for allowing enterprises to flawlessly shift data and applications between the public and private cloud.

Oracle also has an ironclad balance sheet, with over $33 billion in cash and generating over $13 billion in free cash flow annually. Thanks to this cash flow, Oracle Corporation (NYSE:ORCL) has been returning cash to shareholders via buybacks. During the first nine months of fiscal 2013, Oracle bought back $8.2 billion in shares, and is paying a $0.30 quarterly dividend.

Doubling down on big oil

One of Yacktman’s other big bets is on Exxon Mobil Corporation (NYSE:XOM). Yacktman upped its position by 100%, and now the stock makes up 2.4% of Yacktman’s 13F portfolio. Exxon Mobil Corporation (NYSE:XOM) is trading at 9.5 times earnings, which is relatively inline with major peers Chevron Corporation (NYSE:CVX), Total SA (ADR) (NYSE:TOT) and Hess.

With that said, Exxon Mobil Corporation (NYSE:XOM) is the world’s largest publicly traded oil company, and is one of the most defensive names and solid dividend payers in the market. Exxon Mobil Corporation (NYSE:XOM) has an impressive balance sheet, with a AAA credit rating. The oil giant also upped its dividend in April by 10% sequentially.

Exxon Mobil Corporation (NYSE:XOM) has a diversity of operations and broad geographical presence. Its key areas include the U.S., Canada, West Africa, Australia, Russia and Iraq. However, the company isn’t content with its leading position; it still plans to spend $185 billion over the next five years. This money will go toward over 20 oil and gas projects, including plays in unconventional natural-gas fields throughout North America.

Although the story sounds great, its valuation isn’t and the company’s dividend (yielding 2.8%) could be better given the slow expected growth of the company.

Top picks

Yacktman’s top stock holdings at the end of 2Q included News Corp in first, making up 11% of the fund’s 13F, and The Procter & Gamble Company (NYSE:PG) and PepsiCo, Inc. (NYSE:PEP). P&G makes up 9.2% of the Yacktman 13F and PepsiCo, Inc. (NYSE:PEP) 8.9%.

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