Billionaire Donald Yacktman’s Hedge Fund Trims Exposure to Consumer Staples, Energy

Billionaire investing legend Donald Yacktman is increasingly pulling money out of U.S. equities. According to the latest 13F filing submitted by Mr. Yacktman’s hedge fund, Yacktman Asset Management, the value of its U.S. equity portfolio dropped by almost 6% quarter-over-quarter to $12.08 billion as of the end of June, making it the fourth quarter in a row in which the aggregate value of the fund’s long positions declined. In the one-year period between June 30, 2015 and June 30, 2016, the value of the Texas-based hedge fund’s U.S. equity portfolio has fallen by over 35.5%, though whether the declines are due to bearishness, poor performance, client redemptions, or some combination of those factors is unknown.

The latest filing revealed that during the June quarter, the fund added shares to 12 positions and reduced the size of 29 other holdings. The fund did not initiate any new positions or close out of any positions during the quarter, emphasizing Mr. Yacktman’s adherence to a long-term investing window. The filing also revealed that at the end of June, 39% of the value of Yacktman Asset Management’s U.S. equity portfolio comprised stocks from the consumer staples sector, while the portfolio was top-heavy, with its ten largest holdings amassing over 75% of the value of its equity portfolio. In this article we will take a look at five major holdings of Yacktman Asset Management in which the fund reduced its stake significantly during the second quarter.

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Exxon Mobil Corporation (NYSE:XOM)

 – Shares Held by Yacktman Asset Management (as of June 30): 3.45 million

 – Value of Holding (as of June 30): $323.57 million

Let’s start with Yacktman Asset Management’s 11th-largest equity holding, Exxon Mobil Corporation (NYSE:XOM), in which the fund reduced its stake by 17% during the second quarter. Shares of the energy giant have given up a large chunk of the gains they made earlier this year in the last few days, in anticipation of the company’s second quarter results. However, they are still trading up by over 11% year-to-date. For its second quarter, Exxon Mobil Corporation (NYSE:XOM) reported EPS of $0.41 on revenue of $57.7 billion, widely missing analysts’ estimates of EPS of $0.64 on revenue of $60.23 billion. As the earnings of the company were largely dragged down by lower energy commodity prices and lower crack spreads, most analysts believe that Exxon Mobil can do well going forward if oil and natural gas prices move higher. On August 2, analysts at HSBC reiterated their ‘Neutral’ rating on the stock and set a price target of $83.50 on it. Russell Lucas‘ Lucas Capital Management also reduced its stake in the company during the second quarter, by 6% to 33,178 shares.

SYSCO Corporation (NYSE:SYY)

 – Shares Held by Yacktman Asset Management (as of June 30): 14.83 million

 – Value of Holding (as of June 30): $752.56 million

Yacktman Asset Management reduced its stake in SYSCO Corporation (NYSE:SYY) by 15% during the second quarter. After taking a break last year, SYSCO Corporation (NYSE:SYY)’s stock has again resumed its uptrend this year, as it’s currently trading up by 25% year-to-date. In the last few quarters, the company has made several acquisitions as part of its growth strategy, including the $3.1 billion acquisition of Brakes Group, which was completed last month. SYSCO Corporation currently pays a quarterly dividend of $0.31 per share, which translates into a respectable annual dividend yield of 2.39%. On July 18, analysts at Deutsche Bank AG initiated coverage on the stock with a ‘Hold’ rating and $52 price target. Other hedge funds that reduced their stake in SYSCO Corporation during the second quarter included Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, which trimmed its holding by 23% to 13,587 shares.

On the next page, we’ll take a look at three more top holdings of Mr. Yacktman that were cut in size during the second quarter.