Donald Yacktman: Viewing Stocks as Bonds

A former “Morningstar Fund Manager of the Year,” Donald Yacktman needed little introduction.

Unlike many of today’s speakers, Yacktman invests primarily in large- and mega-cap companies. His first priority is protecting investors’ capital. His second is growing people’s capital. He accomplishes the former by avoiding making bad investment decisions.

Yacktman looks only at long-term investments that offer a compelling price given their underlying assets. He also searches for companies with a high cash return on tangible assets. Lastly, Yacktman looks at companies in sectors with secular – not cyclical – growth. Consumer staples, in particular, come to mind.

“Buying above-average companies at below-average prices” is how Yacktman characterizes his investment style. “It’s better to be Billy Beane than George Steinbrenner.”

Companies such as Coke (NYSE: KO), Pepsi (NYSE: PEP) or Procter & Gamble (NYSE: PG) are the equivalent of triple-A bonds, Yacktman says.

Those are among Yacktman Funds’ top 10 holdings. Other holdings include News Corp. (NASDAQ: NWS), Cisco Systems (NASDAQ: CSCO), Johnson & Johnson (NYSE: JNJ) and Microsoft (NASDAQ: MSFT).

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