Donald Yacktman‘s Yacktman Asset Management is one of the most widely-followed funds in the US due to its focus on value investing. Yacktman is known for his rather conservative approach that is very similar to Warren Buffett’s strategy. His equity portfolio is comprised mostly of large and mega-cap stocks that are among the largest and most popular across their industries. Yacktman Asset Management’s latest 13F revealed an equity portfolio valued at $24.12 billion, slightly higher over the quarter. The 13F portfolio contains a total of 50 long positions, mostly in consumer, technology and healthcare sector companies. The largest stakes are represented by PepsiCo, Inc. (NYSE:PEP), Procter & Gamble Co (NYSE:PG), and The Coca-Cola Co (NYSE:KO), which have been on the top for at least a year.
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Even though Yacktman invests mainly in large- and mega-cap stocks, as part of our research, we are more interested in his small-cap picks. Through extensive backtests, we determined that imitating a portfolio of the 15 most popular small-cap picks among investors can generate around one percentage point in excess of the S&P 500 Total Return Index’s monthly return on average. Moreover, these picks generated an alpha of around 80 basis points per month. By comparison, the 50 most popular stocks among hedge funds overall (which are mostly large- and mega-cap companies) had a monthly alpha of six basis points, but underperformed the market by around seven basis points per month. This strategy had a return of around 138% in the last 2.5 years since we started following it in real time and beat the S&P 500 ETF (SPY) by over 80 percentage points (read more details here).
Yacktman owns shares of the two largest producers of soft drinks, PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Co (NYSE:KO), the stakes being the first and third largest in terms of value. In PepsiCo, Yacktman trimmed its stake by around 1.50 million shares to 25.49 million shares valued at $2.44 billion. The decline comes as PepsiCo, Inc. (NYSE:PEP)’s stock inched down by 1.8% during the first quarter. Moreover, for the first three months of 2015, PepsiCo posted a 3.2% annual decline in revenue to $12.22 billion, mainly affected by a stronger dollar. PepsiCo had been in the middle of a proxy contest with another investor, Nelson Peltz of Trian Partners, who had been trying to push for a separation of the company’s snacks segment. However, in January PepsiCo, Inc. (NYSE:PEP) agreed to appoint Trian’s adviser Bill Johnson to its board of directors, thus ending the proxy fight. Trian owns 17.87 million shares of the company as of the end of 2014.
In The Coca-Cola Co (NYSE:KO), Yacktman also reduced its stake, by 5% on the quarter to 38.93 million shares worth $1.58 billion. Similar to PepsiCo, Coca Cola’s sales have put a negative stance on its revenue, which slightly missed expectations in the first quarter at $1.63 billion (down by 13% on the year). Moreover, The Coca-Cola Co (NYSE:KO)’s stock declined by more than 3% during the first quarter. Warren Buffett‘s Berkshire Hathaway is the largest shareholder of The Coca-Cola Co (NYSE:KO), owning 400.00 million shares according to its latest 13F filing.
Procter & Gamble Co (NYSE:PG) represents Yacktman’s second-largest position in terms of value, the fund disclosing a $2.34 billion stake that contains 28.54 million shares. Following the announcement of its financial results for the previous quarter, Procter & Gamble Co (NYSE:PG) has witnessed a line of downgrades among analysts. Societe Generale downgraded the stock to ‘Hold’ from ‘Buy’ and cut its price target to $86.00 from $96.00, while Credit Agricole and CLSA have both downgraded it to ‘Underperform’ from ‘Outperform’. Mr. Buffett is also a shareholder of Procter & Gamble Co (NYSE:PG), holding 52.79 million shares. However, under an agreement signed last year, Berkshire will acquire Procter & Gamble’s Duracell unit in exchange for its position in the company.
In Oracle Corporation (NYSE:ORCL), Yacktman disclosed holding 35.07 million shares valued at $1.51 billion, down by 7% on the quarter. Of late, there has been speculation that Oracle planned to acquire salesforce.com, inc. (NYSE:CRM), although the rumors have been quickly dismissed. Nevertheless, as Oracle Corporation (NYSE:ORCL) is transitioning towards more of a focus on cloud, the company’s Co-CEO Safra A. Catz said that if salesforce is bought by someone else, it could benefit Oracle. Another investor in Oracle Corporation (NYSE:ORCL) is Boykin Curry‘s Eagle Capital Management, which was the largest shareholder among the funds we track with 45.21 million shares as of the end of 2014.
Cisco Systems, Inc. (NASDAQ:CSCO) represents Yacktman’s fifth-largest position in terms of value, as the investor disclosed holding 48.98 million shares valued at $1.35 billion. The position witnessed the largest decrease among the companies from this list, being cut by 14% during the first three months, as the stock remained almost flat inching up by 0.4% during the same period. Cisco Systems, Inc. (NASDAQ:CSCO) is one of the leading companies in the hardware industry and is currently expanding into the Internet of Things (IoT) market, investing in the development of products and solutions for the IoT industry, which it expects to reach $19 trillion in value within the next decade. However, the previous round of 13F filings showed a significant outflow of cash out of Cisco Systems, Inc. (NASDAQ:CSCO) among the investors that we track. A total of 62 funds disclosed holding in aggregate $4.83 billion worth of the company’s stock, down from $6.57 billion in the previous quarter. Ken Griffin, Ken Fisher, and Kerr Neilson are among the billionaires that are bullish on Cisco Systems, Inc. (NASDAQ:CSCO).
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