Don Yacktman, his son, Stephen, and Jason Subotky, all portfolio managers of the Yacktman Fund and it’s sister the Yacktman Focus Fund, are not sitting on their duffs just because their funds are up over 51% and 48% respectively so far this year, according to Morningstar. And just because Mr. Yacktman is a finalist in a very small group of five fund managers being considered as “domestic fund manager of the decade”, doesn’t mean much to this veteran manager with 40 years experience.
What matters to Don and his crew are stocks; stocks trading at a good price, with a good business and boasting a management that has a long term track record in deploying cash. As value mangers, stocks like that are not easy to find, but when they do, they invest heavily. If the price drops, they buy even more.
“We don’t want to have a Noah’s Ark approach to investing,” Mr. Yacktman explained, “the more one diversifies, the more your returns are going to approximate the returns of the S&P.”
He argues that “having too many investments is a function of not having done your homework, because if one really has conviction, then you concentrate those investments.”
Matching the S&P is not what Yacktman is about either. Both funds hold over 50% or more of their assets in their top ten holdings. How has that worked for him?
“My joy comes from looking at our ten year numbers,” he said,” We actually experienced a lost decade where the S&P is down about 1%, including income, and our funds are up 11.7% compounded annually year after year. Over ten years, that is a huge spread.”
He concedes that “every once in a while” he gets one wrong, but insists that rarely do they lose money on the investment.
“It’s a point of pride for us.”
He credits his son, Stephen, who started working for him in 1993, for much of that performance. “I would stack him up next to the best business analysts in America.”
So what is his take on the future?
“I’m worried about the economy and about what is going on in Washington,” he admits. “The Fed is walking a tightrope: low rates now to stimulate the economy, but once it starts to recover, there will be a lot of imbedded inflation, which will force rates up. How long that will take, however, I have no idea.”
This could mean volatile markets will be with us for some time, maybe a long time, but that doesn’t bother Yacktman.
“I welcome more volatility,” he says, “Volatility is the friend of a value manager. In that kind of environment we thrive.”
So how does he plan to handle that volatility?
“The best protection against the worst case, a collapse in the economy, is not gold, it’s stocks like Coca Cola with pricing power and a consistent cash flow,” he argues, referring to his list of investments.
Coke, Pepsi, Microsoft, Viacom, Pfizer, Newscorp, P&G, Comcast and Conoco are among his top ten holdings, according to the fund’s latest quarterly report. Recently, he bought H&R Block as well, according to Yacktman.
“In the past, they ‘de-worsified’ into some businesses that didn’t make any sense, now they have returned to their core business, tax preparation, which generates double digit returns. And I don’t see the tax code getting any simpler over the long term.”
Based on the information in both fund’s prospectuses. The symbol for the Yacktman Fund is YACKX, with an expense ratio of 0.95% and the Yacktman Focused Fund, YAFFX, with a bit higher expense at 1.35%. Neither fund has a front nor back end load and neither has a 12b-1 fee (a kickback to your broker, planner or money manager).