The Yacktman Focused Fund (Trades, Portfolio) recently disclosed its portfolio update for the first quarter of 2021, which ended on March 31.
Operating as part of the Austin, Texas-based value investing firm Yacktman Asset Management (Trades, Portfolio), the fund is managed by Stephen Yacktman and Jason Subotky. It seeks long-term capital appreciation with a secondary focus on income, investing primarily in the common stocks of undervalued U.S. large-cap companies (though a significant portion of holdings are international companies). The portfolio managers also look for shareholder-oriented management teams.
Based on its investing criteria, the biggest new additions to the portfolio during the quarter were Canadian Natural Resources Ltd. (CNQ, Financial), Berkshire Hathaway Inc. Class B shares (BRK.B, Financial) and Northrop Grumman Corp. (NOC, Financial).
Canadian Natural Resources
The fund established a holding of 2,047,999 shares in Canadian Natural Resources (CNQ, Financial), impacting the equity portfolio by 1.86%. During the quarter, shares traded for an average price of $27.60.
Based in Calgary, Canadian Natural Resources is one of the largest independent hydrocarbon exploration and production companies in the world. It operates mainly in Western Canada, the United Kingdom sector of the North Sea, Côte d'Ivoire and Gabon.
On April 19, shares of Canadian Natural Resources traded around $30.53 for a market cap of $36.04 billion. The GuruFocus Value chart rates the stock as modestly overvalued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. While the Altman Z-Score of 1.28 indicates the company could be in danger of bankruptcy, the Piotroski F-Score of 4 out of 9 is typical of a financially stable company. The return on equity of -1.31% and return on assets of -0.58% are performing better than 60% of industry peers.
Berkshire Hathaway
The fund also purchased 165,000 Berkshire Hathaway Class B shares (BRK.B, Financial), which had a 1.24% impact on the equity portfolio. Shares traded for an average price of $242.84 during the quarter.
Berkshire Hathaway is the conglomerate headed by famous value investor Warren Buffett (Trades, Portfolio) and his partner Charlie Munger (Trades, Portfolio). The Omaha, Nebraskia-based group owns a wide variety of businesses, including Geico and other insurance companies, Berkshire Hathaway Energy, BNSF and a sizable investment portfolio.
On April 19, Berkshire Hathaway traded around $269.88 per Class B share for a market cap of $619.54 billion. The GF Value chart rates the stock as fairly valued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The equity-to-asset ratio of 0.51 and interest coverage ratio of 14.64 indicate solid financial health. The three-year revenue growth rate is 6.9% and the three-year Ebitda growth rate is 24.7% (investors should note that beginning in 2018, an accounting change went into effect requiring companies to report unrealized equity portfolio gains in their top and bottom lines, which skews the results).
Northrop Grumman
The fund took a 110,000-share stake in Northrop Grumman (NOC, Financial), impacting the equity portfolio by 1.05%. During the quarter, shares traded for an average price of $301.43.
Northrop Grumman is an American aerospace and defense company primarily engaged in the production of weapons and military technology. Based in Falls Church, Virginia, the company designs, develops, builds and supports products in a wide range of military and related fields.
On April 19, shares of Northrop Grumman traded around $344.38 for a market cap of $55.53 billion. The GF Value chart rates the stock as fairly valued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10. The cash-debt ratio of 0.31 is lower than the industry median of 0.58, but the Altman Z-Score of 2.62 indicates that the company is not likely to face liquidity issues in the near future. The return on invested capital consistently surpasses the weighted average cost of capital, indicating the company is creating value as it grows.
Portfolio overview
As of the quarter's end, the fund held shares in 56 stocks valued at a total of $3.40 billion. The top holdings were Samsung Electronics Co. Ltd. (XKRX:005935, Financial) with 12.69% of the equity portfolio, Bollore SA (XPAR:BOL, Financial) with 7.36% and Microsoft Corp. (MSFT, Financial) with 4.51%.
In terms of sector weighting, the fund was most invested in consumer defensive, technology and communication services.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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