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 an investor as Buffett, Soros, Berkowitz, and the like, but his track record is right up there with theirs. Yacktman is a value investor, aiming to achieve the highest possible risk-adjusted long-term return on his investments. The company's flagship Yacktman Fund gained 618% since its 1992 inception (as of the end of 2012), compared with 418% for the S&P 500 during the same period. (Annualized, that's 10.1% vs. 8.4%.) Its reportable stock portfolio totaled $16.7 billion in value as of December 31, 2012.
So what does Yacktman's latest quarterly 13F filing tell us? Here are a few interesting details:
The only new holdings are Dell and IBM (NYSE: IBM ) . Longtime tech blue chip IBM is up almost 8% over the past year, which is nice enough, but it has averaged annual gains of 9.6% over the past 30 years and 16.2% over the past 20. Better still, analysts expect continued robust growth, as it expands into areas such as cloud computing and "big data." Bears worry, meanwhile, about IBM's maturing markets and more nimble rivals.
Among holdings in which Yacktman increased its stake was Avon Products (NYSE: AVP ) . While Yacktman is apparently bullish on the company, others see it struggling as it lays off some 1,500 workers globally and exits some markets, such as Vietnam and South Korea. Profits have dropped sharply, it slashed its dividend, and it's trying hard to cut costs. The stock is down about 50% over the past four years. Such situations can be great opportunities for investors, but not always. Tread carefully if you're intrigued.
Yacktman reduced its stake in lots of companies, including BlackBerry (NASDAQ: BBRY ) and United Parcel Service (NYSE: UPS ) . BlackBerry, until very recently known as Research in Motion, averaged 20% annual gains over the past decade, but 33% annual losses over the past five, fighting strong competition from iPhones and Android devices. It also recently debuted two new devices, but some think that's not enough to turn the company around. The stock did get a big boost recently, though, on news of a Wall Street upgrade.
Many had high expectations for UPS's global expansion via an acquisition of Europe's largest package deliverer, TNT, but that deal was recently nixed by regulators. The upside of that is billions of dollars that can now be deployed in other shareholder-enriching ways, such as stock buybacks and dividend increases. Price hikes and better negotiated deals with partners can also help.
Finally, Yacktman's closed its positions in Liberty Interactive and Abbott Labs (NYSE: ABT ) . Abbott has just split its pharmaceutical business from its nutrition and devices businesses, which some expect will unlock more value for investors. The new pharmaceutical entity is AbbVie, which is starting out with about $18 billion in annual revenue but also a lot of debt. Some worry that AbbVie is too dependent on its $8 billion drug Humira, which faces patent expiration, though growth in emerging markets may make up for some of that. It does have other drugs in its pipeline, but they're not approved and selling yet, and some may never get that far. It will also be affected by a new tax on medical devices.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.
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