With the round of 13F filings for the March quarter still underway, we have decided to take a closer look at the top technological picks of Donald Yacktman‘s Yacktman Asset Management, according to its recent filing corresponding to this period. Founded in 1992, the Austin, Texas-based boutique investment advisory firm currently has $30.5 billion worth of assets under management. Back in 2011, Morningstar Inc. named Yacktman and his son Stephen Yacktman, who is currently the fund’s Chief Investment Officer, as finalists for the ‘Manager of the Year’ award. The investment firm’s philosophy revolves around using a bottom up approach to find undervalued large companies for long-term investment.
Given that philosophy, it is not a surprise that no drastic changes were seen in the firm’s top technology picks, which were comprised of Oracle Corporation (NYSE:ORCL), Cisco Systems, Inc. (NASDAQ:CSCO), Microsoft Corporation (NASDAQ:MSFT), and eBay Inc (NASDAQ:EBAY). The market value of the fund’s equity portfolio stood at $24.12 billion at the end of March, and the technology sector represented 21% of this value.
Yacktman Asset Management is a fund that we have been following for the last couple of years along with over 700 other investors. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are 45 days delayed. We used a 60-day delay in our back tests to be on the safe side. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012. These stocks returned 137% over the last 2.5 years, outperforming the S&P 500 ETF by over 82 percentage points (see more details here).
Yacktman trimmed its top technology holding, Oracle Corporation (NYSE:ORCL) by about 7% to nearly 35.07 million shares valued at $1.51 billion. The holding represented 6.97% of the fund’s portfolio value. The stock of the $193.77 billion provider of enterprise software, computer hardware, and services is down by about 1.33% year-to-date. Oracle Corporation (NYSE:ORCL) recently launched a $10 billion debt offering, the proceeds of which could be used for stock repurchases, dividend payouts and/or future acquisitions. It was also rumored recently that salesforce.com, inc. (NYSE:CRM) has been approached with an acquisition offer and Oracle Corporation (NYSE:ORCL) was on the list of suspects given its size and acquisition willingness, among other factors. However, Oracle’s co-CEO Safra Catz removed his company from such speculation with a recent statement to the contrary. Of the funds in our database, Boykin Curry‘s Eagle Capital Management is the largest stockholder of Oracle Corporation (NYSE:ORCL).
Next in line is Cisco Systems, Inc. (NASDAQ:CSCO), which represents 6.21% of the fund’s portfolio value after its holding was slashed by 14% during the quarter. The stake is now comprised over 48.98 million shares valued at $1.35 billion. Cisco Systems, Inc. (NASDAQ:CSCO) is undergoing a management change this year as Chuck Robbins, the newly named CEO, plans to take over the reins from current CEO John Chambers on July 26. Robbins was also elected to the company’s board on May 1. Cisco Systems, Inc. (NASDAQ:CSCO) has a five year top-line growth rate of 5.47% compared to the industry’s average of 3.47%. Among the billionaires that we track, six held Cisco Systems, Inc. (NASDAQ:CSCO) in their respective funds’ portfolios at the end of 2014. Ken Fisher is one such billionaire money manager, who now holds 15.33 million shares of Cisco Systems, Inc. (NASDAQ:CSCO) in Fisher Asset Management’s portfolio.
Yacktman sold about 455,400 shares of Microsoft Corporation (NASDAQ:MSFT) to drop the fund’s holding to 21.53 million shares valued at $875.51 million. With its new operating system, Windows 10, which is going to go by the same name for mobile devices as it will for desktops and laptops, Microsoft Corporation (NASDAQ:MSFT) is aiming to get a billion users for it. The tech giant has also recently announced the name of its new browser, Edge, which is set to trump the decades-old Internet Explorer in terms of speed. Jeffrey Ubben’s ValueAct Capital held about 74.24 million shares of Microsoft Corporation (NASDAQ:MSFT), according to its latest filing.
Lastly, Yacktman slightly decreased his stake in eBay Inc (NASDAQ:EBAY) by some 145,300 shares to 7.94 million shares valued at $458.25 million. The technology company has an earnings multiple of 24.7, which compares favorably to the industry’s average of 42.6. Following the spin-off later this year of PayPal, eBay Inc (NASDAQ:EBAY)’s payment arm, some analysts believe that eBay will be reduced to a long-term investment, owing to its slow growth. Renowned activist investor Carl Icahn’s Icahn Capital LP held 46.27 million shares of eBay Inc (NASDAQ:EBAY)’s stock in its portfolio, according to its latest filing for the period as of the end of 2014.
Disclosure: None
