The Yacktman Focused Fund (Trades, Portfolio) primarily seeks long-term capital appreciation and current income. During the second quarter, the fund's managers, Stephen Yacktman and Jason Subotky, eliminated their Unilever NV (UN, Financial) position and trimmed several other positions, including Samsung Electronics Co. Ltd. (XKRX:005935, Financial), Oracle Corp. (ORCL, Financial) and Johnson & Johnson (JNJ, Financial).
Unilever
Subotky and Yacktman sold their 400,000-share stake in Unilever for an average price of $54.04 per share. The fund managers trimmed 0.57% of their portfolio with the transaction and gained approximately 23% on the stock based on GuruFocus estimates.
The Dutch consumer goods company has seven medium warning signs, including price valuations near a 10-year high, declining revenue per share growth and a trailing dividend yield near a 10-year low. Unilever’s share price is near its maximum price-sales valuation of $57.70.
Samsung
The fund managers axed one-quarter of their Samsung position, selling 113,554 shares for an average price of 1,749,650 Korean won ($1,556.87) per share. Subotky and Yacktman trimmed 4.67% of their portfolio with this transaction, their largest trade for the quarter based on portfolio impact.
Samsung’s share price of 2 million won is near the company’s 10-year maximum price-sales valuation, implying significant overvaluation. The Korean telecommunications company’s price-sales ratio ranks lower than 61% of global competitors.
Although Samsung has strong financial strength and profitability, the company’s three-year revenue growth rate of -2.20% is near a 10-year low and underperforms 64% of global consumer electronics companies. Samsung’s earnings per share (without nonrecurring items) have declined approximately 7.20% per year over the past three years.
Oracle
Subotky and Yacktman sold 574,000 shares of Oracle for an average price of $45.52 per share during the second quarter. The fund managers have trimmed the position each quarter since second-quarter 2015.
Oracle reported strong results for the quarter, including double-digit software as a service revenue growth from the prior-year quarter. The company has a strong profitability rank of 8, with profit margins outperforming 95% of global infrastructure companies.
Although the company has good growth potential, Oracle’s share price of $50.99 is near a 10-year high and approximately $9 higher than its median price-sales value. The company has a margin of safety of -47% based on its discount earnings valuation. Oracle’s forward rate of return of 7% is near a 10-year low and underperforms 61% of global competitors.
Johnson & Johnson
Yacktman’s fund managers trimmed 5.88% of their J&J position, selling 100,000 shares for an average price of $127.55 per share.
J&J has a share price near a 10-year high despite having profit margins that outperform over 92% of global competitors. Like Unilever, the New Jersey-based drug manufacturer has price valuations near a 10-year high and a dividend yield near a 10-year low. The stock currently trades near its 10-year maximum price-sales valuation of $136.40.
Sells outweigh buys
Subotky and Yacktman made just two buys during the quarter: Cognizant Technology Solutions Corp. (CTSH, Financial) and Infosys Ltd. (INFY, Financial). The two buys increased the portfolio about 0.95% in the aggregate, significantly lower than the portfolio impact from the Samsung transaction. Subotky and Yacktman also trimmed positions in Microsoft Corp. (MSFT, Financial), The Coca-Cola Co. (KO, Financial) and Cisco Systems Inc. (CSCO, Financial).
Disclosure: The author has no postions in the stocks mentioned.
