Yacktman Asset Management Keeps Betting on Consumer Stocks

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Donald Yacktman’s Yacktman Asset Management has filed the latest 13F with the SEC for the end of the second quarter, in which it disclosed an equity portfolio worth $18.74 billion, down from $21.71 billion held at the end of March. The fund holds 42 long positions, while its top ten picks amass 68.3% of the total portfolio value. In this article, we will take a closer look at Yacktman’s top picks, which include: Procter & Gamble Co (NYSE:PG), PepsiCo, Inc. (NYSE:PEP), and Twenty-First Century Fox Inc (NASDAQ:FOXA).

Donald Yacktman

Yacktman Asset Management was founded in 1992 and it focuses on value-priced equities. Donald Yacktman was named “Portfolio Manager of The Year” by Morningstar in 1991, and before founding his firm, he had worked at Selected Financial Services and Stein Roe & Farnham. The fund is managed by Donald Yacktman’s son, Stephen Yacktman, who acts as the Chief Investment Officer. The fund’s investing philosophy is entrenched in value-investing, backed by rigorous research and bottom-up stock selection.

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We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 65 percentage points (123% return vs. S&P 500’s 58% gain) over the last 34 months (see more details here).

Yacktman Asset Management owns 28.64 million shares of Procter & Gamble Co (NYSE:PG) valued $2.24 billion as of June 30. This represented 11.96% of the fund’s equity portfolio. The multinational consumer goods company has a market cap of $206.27 billion and trades at around 25 times earnings, versus the Consumer Goods sector average P/E of 14.81. In early July, Procter & Gamble Company (NYSE:PG), announced a multi-billion dollar deal with Coty Inc (NYSE:COTY). The deal, which will see 43 Procter & Gamble brands folded into Coty in a “Reverse Morris Trust” transaction, is valued $15 billion. The Cosmetics & Toiletries company announced earnings per share of $1.00 for the second quarter, against the Wall Street estimate of $0.94. However, the company also booked its third straight year of decelerating organic growth. Year-to-date the stock lost around 17%. Among other shareholders of the company in our database, Ken Fisher’s Fisher Asset Management held 7.61 million shares worth $607.25 million at the end of June.

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