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Every quarter, many money managers have to disclose what they've bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at investing giant Donald Yacktman, who founded Yacktman Asset Management in 1992. He isn't as well known as investors such as Buffett, Soros, Berkowitz, and the like, but his track record is right up there with them. Yacktman is a value investor, aiming to achieve the highest possible risk-adjusted long-term return on his investments. According to the folks at GuruFocus.com, Yacktman gained about 175% cumulatively over the past decade, compared with just 35% for the S&P 500.
Yacktman’s reportable stock portfolio totaled $15.3 billion in value as of June 30, 2012. Its top holdings were News Corp., Procter & Gamble, and PepsiCo (NYSE: PEP ) .
What does Yacktman's latest quarterly 13F filing tell us? The main takeaway is that the managers there are confident and focused. There are only a few dozen holdings, despite the billions managed, and there often aren’t many changes from quarter to quarter.
This latest report, for example, announces no new holdings, and only two positions closed out -- in Exelon (NYSE: EXC ) and Paychex (Nasdaq: PAYX ) . Exelon’s bulls like its dominance in nuclear-powered energy production, as well as its diversification into other kinds of energy. Bears, though, worry that our sluggish economy will keep demand down, and that the low price of natural gas will make nuclear power less attractive. (The Fukushima disaster didn’t make nuclear power many new friends, either.) Paychex, meanwhile, is serving a struggling segment of mid- and small-sized businesses, and is competing against powerhouse Automatic Data Processing and QuikBooks maker Intuit. Still, bulls like its prospects in an eventually healthier economy, as well as its operational diversification.
Among holdings in which Yacktman increased its stake were Sysco (NYSE: SYY ) and ConocoPhillips (NYSE: COP ) . Sysco dominates the food distribution industry, and has seen its growth slow recently, due, in part, to rising food prices and slowing restaurant traffic. Still, it’s a dividend titan, and has been able to maintain its profit margins while cutting costs.
ConocoPhillips recently spun off its downstream business into Phillips 66, and is focusing on its higher-margin oil and gas exploration and production business. The company’s production has slowed, though, and Goldman Sachs recently downgraded the stock, with some worrying whether its dividend will be cut.
Yacktman reduced its stake in a handful of companies, including PepsiCo, though it didn’t trim that much. It’s true that, on some counts, PepsiCo seems like less of a perfect stock than it used to be, in part due to its debt levels. But its profit margins remain solid, and its slowing growth rate still beats that of many other companies. Some worry about recent attacks on sodas, though, and think the stock may not have much more room to grow in the near term, as it’s had a strong year.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
If you’re interested in the energy industry but are not completely sold on ConocoPhillips or Exelon, know that there’s one energy stock that could be even better. In fact, it could be The Only Energy Stock You'll Ever Need. It's poised to make investors rich off the next energy spike. Read more about it.