The list of top-performing value investors is filled with
names that have been praised in the public eye for decades --
, for instance.
Often, the investing methodology is similar among these gurus:
Find solid companies with good management that are intrinsically
undervalued and have long-term growth potential.
One billionaire fund manager has taken this tried-and-true
mantra and delivered eye-popping results for over 20 years now --
while keeping a fairly low profile.
Donald Yacktman founded his fund, Austin, Texas-based Yacktman
Asset Management, in 1992. Since then, he has garnered much
respect from both the financial community and no doubt from his
investors as well, who have taken his hard work and results
straight to the bank.
Together with his portfolio management team, which includes
his son Stephen Yacktman, Donald Yacktman has set himself apart
with research-driven ideas that have seen his assets under
management grow at amazing rates. His most recent Form 13F shows
his portfolio at nearly $24 billion mark and was at one point
receiving inflows of $20 million a day.
With the recent release of his 13F for the first quarter of
2014, we can see how he is employing his fund's massive amounts
of capital. Let's take a closer look at some of the
higher-yielding investments in his portfolio.
Two of his best income producers come from the same industry:
tobacco. In fact, they both originated from the same company.
Altria Group (NYSE:
Philip Morris International (NYSE:
have found a home in Yacktman's funds for years and currently
offer dividend yields of 4.7%, and 4.3%, respectively.
For those why may not be aware, Altria was initially known as
Philip Morris, but the name was changed in 2003, followed by a
spin-off of Phillip Morris International in 2008 to increase
freedom of operations outside of U.S. governance.
Both MO and PM stand to become lead players in the
ever-growing e-cigarette market, a trend that continues to gather
steam in 2014. Although Wall Street analysts are overwhelmingly
neutral on the tobacco giants as a whole, firms such as RBC
Capital Markets see the companies' existing resources and
channels of distribution as huge benefits to thwart outside
As the FDA moves closer to regulating the e-cig
, the larger players are poised to come out on top as barriers to
entry rise. Competitor
, which pays a 4% dividend, is the current leader in the $2
billion industry, accounting for nearly 50% of offerings in
Yacktman has also found impressive dividend income from office
, which pays a respectable 4.3%. His 2.3 million shares have seen
better days, however, as the stock currently trades near 52-week
lows, having recently been cut to "sell" by Goldman Sachs (which
bumped up competitor
Office Depot (NYSE:
to "buy" the same day).
However, the office supply retailer industry is contracting
across the board, with both Staples and Office Depot closing
stores across the U.S. Yacktman is known for his Buffett-esque
strategies (such as buying and holding when others flee) -- we'll
see whether this stake works out in his favor.
is another consumer staple in the fund's holdings, a sector that
accounts for over 40% of Yacktman's investments. After a dividend
increase last month, Clorox now pays shareholders a 3.4% yield.
The bump has positive implications for both future earnings
growth and cash flow, two metrics lauded by investors like
Clorox has been in the news recently due to an insider trading
, who is being investigated on accusations that pro golfer Phil
Mickelson and gambler Bill Walters were tipped off prior to
Icahn's large stake in CLX (and subsequent takeover bid) in
Risks to Consider:
Evaluating successful managers' filings is a great starting
point to generate investing ideas, especially when singling out
long-oriented value investors like Yacktman. However, these
filings should be used only as starting points for further
research and due diligence. Additionally, Yacktman reduced many
of his positions in the first quarter of 2013, hinting at some
profit-taking or a move to cash.
Action to Take -->
After posting solid returns throughout his career, Donald
Yacktman closed his funds to new investors at the end of last
year. To mimic his performance, scrutinize these portfolio picks
to see whether they could be a good fit for your portfolio as
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