Here's What This Huge 757% Gainer Has Been Buying

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. The company's flagship Yacktman Fund gained 757% since its 1992 inception (as of the end of September, 2013), compared with 521% for the S&P 500 during the same period. (Annualized, that's 10.7% vs. 9%.)

The company's reportable stock portfolio totaled $22.4 billion in value as of Sept. 30.

Interesting developments
So what does Yacktman's latest quarterly 13F filing tell us? Here are a few interesting details.

Yacktman's top holding is Twenty-First Century Fox, which was separated from News Corp. Management's third-quarter commentary noted: "Media stocks continued to perform exceptionally well for our Funds. Twenty-First Century Fox, one of the largest positions in each Fund, had strong performance in the quarter after it was separated from News Corp. ... The "new" News Corp, which consists of Twenty-First Century Fox & News Corp shares, still had a significant weighting at the end of the quarter because the cable content value has grown significantly more in value since 2010."

Meanwhile, there were relatively few holdings in which Yacktman Asset Management increased or decreased its stake. Among those increased were Oracle (NYSE: ORCL  ) , Coca-Cola (NYSE: KO  ) , PepsiCo (NYSE: PEP  ) , and Dell (UNKNOWN: DELL.DL  ) . Data management software giant Oracle has seen its growth slow in recent years and has made some competitive compromises and partnerships. Shareholders have not been thrilled with CEO Larry Ellison's compensation which is usually in the tens of millions and in 2013 topped $150 million. Oracle is facing significant competition from other tech titans as well as from relative upstarts such as Workday, founded by some folks Ellison dismissed. Oracle has doubled its dividend while announcing big stock buybacks and generating prodigious free cash flow that tops $14 billion annually. The stock seems appealingly valued at recent levels.

Coca-Cola may be huge, with its market cap near $175 billion, but it's still growing, with global volume up 2% in its third quarter. The growing global middle class has the beverage giant optimistic that it can double its revenue in the next seven years. Coca-Cola stock recently yielded 2.8%. Bulls are pleased with recent marketing successes and management's capital priorities. Socially responsible investing enthusiasts are especially pleased with Coke's initiative to provide clean water to global communities in need.

PepsiCo's soft-drink market share of about 28% is far smaller than Coke's 42%, but there's much more to PepsiCo than just beverages. It's a salty-snack giant, you see, with snack sales growing more briskly than drink sales. (Its brands are familiar to almost any American: Frito-Lay, Cheetos, Doritos, etc.) Besides, in overall beverages, PepsiCo actually leads Coca-Cola in retail sales. Activist shareholder Nelson Peltz has suggested that the company acquire Kraft Foods spinoff Mondolez International and then separate its drinks and snacks businesses.

Dell, recently yielding 2.3%, won't be rewarding shareholders quarterly in the near future, as its founder Michael Dell recently sealed a deal to buy back his company and take it private. This will offer some advantages to the company, with Dell explaining , "we will have the flexibility to accelerate our strategy and pursue organic and inorganic investment without the scrutiny, quarterly targets and other limitations of operating as a public company." (In other news, some Dell laptops have been accused of smelling like cat urine.)

Yacktman Asset Management reduced its stake in companies such as Hewlett-Packard (NYSE: HPQ  ) , which has surged nearly 80% over the past year and yields 2.4%. Investors were not thrilled with the company's last quarterly report, featuring shrinking revenue and earnings – though free cash flow remains hugely positive, at nearly $10 billion annually. CEO Meg Whitman says that she sees Hewlett-Packard's revenue stabilizing soon and she has been cutting costs effectively. The printing giant's plans to compete in 3-D printing have many intrigued.

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.

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