Yacktman 's big three

[plato1976]

http://online.barrons.com/article/SB50001424053111904462504579139341318918238.html?mod=BOL_twm_fs#articleTabs_article%3D0

 

I couldn't convince myself to buy KO

I have heard of Yacktman 's argument for a while

Basically he's saying the forward yield is free cash yield + growth + inflation

So take KO as an example, currently its free cash flow yield is close to 4.5%, suppose we have 2% growth and 2% inflation we should have a forward yield around 8.5%

 

To me, the free cash flow yield of 4.5% is really not high enough to convince myself into buy this one, when other relatively low quality stocks still can generate 20% (see packer's ideas...)

 

My bar for these absolutely high quality ones is a forward yield of low teen at least...

 

What do you guys think ?

 

 

 

[Packer16]

Given Yactman's size and amount of capital to deploy, his set of potential buys is smaller than most of the individual folks here.  I am all for using your small size as an advantage.

 

Packer

[Palantir]

I agree with OP, plus, don't take the Yield + Growth = Return formula too seriously. It's a nice shortcut, but I wouldn't bet an investment on it.

 

There are many great businesses with a Yield of 5%+, I don't see the case for KO either.

 

 

 

[jouni1]

the yield isn't enough. from superb businesses i want something around 9% fcf yield. i rarely invest in companies that i don't see as "hold forever" investments because of our idiotic tax system. if the company is growing quick enough, i might sacrifice a percentage point or two, but not for KO.

 

there's always the fear that more people start thinking like me. i was a heavy-duty coke drinker. then realized sugar and sweeteners aren't really something i want to spend money on. now i do a can or two a week. that's about 5% of what i used to drink.

 

edit:

to clarify: i don't see it as such a high quality investment. in 30 years or so, coke could be viewed as the new philip morris or something. selling addictive poison to poor people who don't know any better. so at 15% i might take a bite but at 4,5% never.

[jay21]

I liked this part:

 

How would you sum up your investing approach?

 

I'll mention one of my sons, Stephen, and Jason Subotky, who also works here. Jason says: "It is almost always about the price." And Stephen says that when you buy a stock, you should always be happy if, when the stock goes down, you are willing to buy more. If you can't do that, then you probably own too much. A while back, my family and I were sitting around the dinner table, and we were talking about investing. Another of my sons, Brian, who does not work with me, but who has his own mutual fund, was in his late teens or early 20s at the time. And he said, "Let me see if I get this right, Dad. Basically, what you have said is that if you buy above-average businesses at below-average prices, on average it is going to work." So what you are trying to do is stack the odds in your favor. It is a little more sophisticated than my son's explanation, but it's a good summary.

 

 

[fareastwarriors]

http://wealthtrack.com/special-series/great-investors-series/donald-yacktman-great-investor-turns-conservative/

 

Yacktman on WealthTrack.