We have just updated the second quarter portfolio of Yacktman
Funds. We found that Yacktman Funds added its position in
) during the second quarter. The firm now owns 11 million shares
of RIMM, which is a 16% increase from the first quarter. Yacktman
Funds started buying RIMM in the second quarter of 2011, when the
stock was traded at $40s. with the recent purchases, Yacktman's
cost per share is still at around $25. The stock is now traded at
$7 and change.
In our latest interview with Don Yacktman and his associate
Russell Wilkins, GuruFocus asked about his view on
Research-In-Motion. This is the part of the interview:
We talked about out of favor, and you mentioned Research
In Motion. That stock has lost around 90-something percent from
the peak, and today we just reported that
from Fairfax bought another 25 million shares.
Yacktman: The stock hardly moved, didn't it?
Yeah, haven't moved. What do you think about the company?
You own a position.
Yacktman: Here's the dilemma with it. It has a wide array of
outcomes. We felt we had protection, but what happens in a
company like this where there's no dividend, the protection is
there, it still remains there, but I think people get very
nervous about it. I think you have three pieces. You have the
cash, you have the patents and you have the embedded base. The
real problem is that they've continued to stub themselves in the
foot on the new phone, and the concern we've had increasingly
about it is that that part then becomes a little bit of an ice
cube, particularly the embedded base part which - the other two
are pretty clear, and you can clearly there have some worth to
sell the patents and the cash obviously, but the embedded base
will only stay with you so long if you don't come up with another
product that's going to work. They'll switch to Apple or
whatever. And this phone better work. They've delayed it what,
three or four times now?
Yacktman: You're stretching the patience of your embedded base,
and it's scary. That's why we have such a tiny position in it,
because we just don't have a high level of confidence. But the
same $20 of value that was there when we initially looked at it
is pretty much $20 of value. It may be slightly less, or may have
started a little bit higher.
We have a lot of discussions on Research-In-Motion (
). The value camp thinks that the stock is now sold at far below
its liquidation value. The value trap camp thinks that the
company is in long term trend of decline. Don Yacktman thinks the
stock is worth about $20. But he does not have enough confidence
to build a large position in the stock. RIMM is only 0.54% of his
total portfolio. He said in the interview:
So to us, the better approach is the take a small amount of
capital with those kinds of situations, whether it be BAC or
Research In Motion (RIM). We have a number of them that we've
done that over the years, and what happens is if you're wrong,
you don't get killed. As a package, they can work out quite
nicely, but any one of them could be a disaster.
So his approach to these high risk and high return positions are
to buy a basket of it. If we check
, these stocks probably include Apollo Group Inc (
), Hewlett-Packard (
), Goldman Sachs (
), Janus Capital (
) etc. Each of them is about 0.5% of the Yacktman Funds' total
portfolio. In strong contrast, for companies such as News Corp (
), Procter & Gamble (
), and Pepsi (
), which he has strong confidence with, he put more than 10% of
the portfolio into them.
We will publish the entire interview after it is reviewed by Mr.
Yacktman. In the meantime, you can also read:
Don Yacktman's latest portfolio
Risk Adjusted Return - The Secret to Don
3. What Are High Quality Companies to Don Yacktman About
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