Analyzing Donald Yacktman’s Top Buys

Gayatri is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Yacktman Asset Management’s Donald Yacktman recently filed 13-F form for the quarter ended Sept. 30, 2012. The following is a list of his top buys from the last quarter.

<table> <tbody> <tr> <td> <p>Company Name</p> </td> <td> <p>Shares Bought Last Quarter</p> </td> <td> <p>Shares Held- Sep. 30, 2012</p> </td> </tr> <tr> <td> <p><strong>Research In Motion Limited </strong><br /> <span class="ticker" data-id="205221">(NASDAQ: <a href="">BBRY</a>)</span></p> </td> <td> <p>12,233,010</p> </td> <td> <p>23,477,496</p> </td> </tr> <tr> <td> <p><strong>The Coca-Cola Company</strong><br /> <span class="ticker" data-id="204186">(NYSE: <a href="">KO</a>)</span></p> </td> <td> <p>6,707,760</p> </td> <td> <p>13,473,621</p> </td> </tr> <tr> <td> <p><strong>Cisco Systems, Inc.</strong><br /> <span class="ticker" data-id="203219">(NASDAQ: <a href="">CSCO</a>)</span></p> </td> <td> <p>6,493,156</p> </td> <td> <p>52,495,386</p> </td> </tr> </tbody> </table>

Here’s a look at these stocks in detail.

With a 40% decline in revenue, RIMM is expected to post a loss of $1.26 per share for the current year, versus a $4.20 per share profit last year. RIMM’s current share price looks low when we take into account its $4 per share cash holding. The company continues to generate solid services revenues; however, its devices business is on a decline. I believe if the company is even able to stabilize its device business, the stock can see substantial upside. The company is going to launch BB10 early next year, and the stock’s future price movement will depend a lot on how exactly the consumer likes this new device. However, I still find risk reward on a favorable side. If everything would have been going right, there’s no way the company would be available at such low valuations.

Coca-Cola is trading at a forward P/E of 16.57. Its expected EPS for the current year is 2.00, and next year it's 2.19. The company is expected to post top line growth of 3.40% in the current year and 5.30% next year. I like Coca-Cola’s market leading position, exposure to high growth emerging markets, its high dividend yield and defensive characteristics. Once all that is coupled with its steady growth prospects, Coke looks like an ideal investment. The company reported results recently, with better than expected results in North and South America offset by shortfalls in Europe and the Pacific. Short term macro headwinds aside, I believe the company’s management is maintaining a fine balance between profits and investment for growth, and the stock is a must buy for investors seeking low risks and steady rewards.

Cisco is trading at a forward P/E of 8.09. Its expected EPS for the current year is 1.94, and next year it's 2.08. The company is expected to post top line growth of 5.80% in the current year and next year.  Cisco is a good buy, with a 12% free cash flow yield and a 3% dividend yield. Cisco is well placed to benefit from growth in data center with its switching and UCS server products. The company is likely to grow between 5-6% in the longer term and maintain its 60% plus gross margins. With $2.66 cash per share and a low P/E, I find the stock attractive.

To sum up, Coca-Cola is a good long term investment for low risk investors seeking steady returns. RIMM, on the other hand, is a very high risk - high reward bet and its stock price will largely depend on BB10 adoption. Cisco lies somewhere in between, and once the macro worries subside, the stock can deliver good returns.


GayatriSharma has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend The Coca-Cola Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus