The Yacktman Focused Fund (Trades, Portfolio), part of Yacktman Asset Management, released its first-quarter portfolio on Tuesday, listing two new holdings.
Managed by Stephen Yacktman, the son of founder Donald Yacktman (Trades, Portfolio), and Jason Subotky, the Austin, Texas-based fund primarily invests in large-cap U.S. companies to achieve long-term capital appreciation and current income. When picking stocks, Yacktman and Subotky look for good businesses with shareholder-oriented management teams that are trading at low purchase prices.
The fund added two Korean stocks to its portfolio during the quarter: KT&G Corp. (XKRX:033780, Financial) and Hyundai Home Shopping Network Corp. (XKRX:057050, Financial). It also increased its position in Bollore SA (XPAR:BOL, Financial).
KT&G
The fund invested in 288,459 shares of KT&G for an average price of 103,436 won ($96.91) per share, giving it 0.87% portfolio space.
Korea’s largest tobacco company, which also produces ginseng products, cosmetics and pharmaceutical products, has a market cap of 12.51 trillion won; its shares were trading around 99,100 won on Tuesday with a price-earnings ratio of 10.75, a price-book ratio of 1.61 and a price-sales ratio of 2.68.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
Despite issuing new long-term debt over the past several years, GuruFocus rated KT&G’s financial strength 8 out of 10 because it has a comfortable level of interest coverage and a strong Altman Z-Score of 5.84. Its profitability and growth was rated 8 of 10 as it has an expanding operating margin, a moderate Piotroski F-Score of 5 and a 2.5-star business predictability rating (out of five).
The Yacktman Fund (Trades, Portfolio) also established a position during the quarter. Of the gurus invested in KT&G, Charles de Vaulx (Trades, Portfolio) has the largest holding with 0.46% of outstanding shares. The IVA International Fund (Trades, Portfolio) is also a shareholder.
Hyundai Home Shopping Network
The portfolio managers purchased 65,590 shares of Hyundai Home for an average price of 111,938 won per share, expanding the portfolio 0.21%,
The online retail company, which sells apparel, sportswear, beauty products and electronic goods on its platform, has a market cap of 1.21 trillion won; its shares were trading around 104,500 won on Tuesday with a price-earnings ratio of 9.88, a price-book ratio of 0.78 and a price-sales ratio of 1.16.
According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.
Hyundai Home Shopping’s financial strength was rated 8 out of 10 as it has no debt and a strong Altman Z-Score of 4.30. Although the company’s operating margin has been declining over the past several years, its profitability and growth is rated 7 out of 10 as it still outperforms 85% of competitors.
With 0.77% of outstanding shares, Francisco GarcĂ Âa ParamĂ©sĂ‚ is the company’s largest guru shareholder. The Focused Fund holds 0.56%.
Bollore
The Focused Fund also boosted its stake in Bollore by 118.47% to 9.6 million shares. Paying an average price of 4.52 euros ($5.60) per share for 5.2 million shares, the trade had an impact of 0.89% on the portfolio.
The French infrastructure company, which provides transportation, logistics, communication and electricity storage services, has a market cap of 12.97 billion euros; its shares were trading around 4.46 euros on Tuesday.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading higher than its fair value.
Bollore reported an 82% increase in revenue to 18.33 billion euros in 2017. Net income rose 58% to 2.08 billion euros over that same period.
Of the gurus invested in Bollore, de Vaulx has the largest position with 0.86% of outstanding shares. The Yacktman Fund, the IVA International Fund, the Invesco European Growth Fund (Trades, Portfolio) and Paramés are also shareholders.
Other trades
During the quarter, the fund also reduced its holdings of Cisco Systems Inc. (CSCO, Financial), Twenty-First Century Fox Inc. (FOXA, Financial), Microsoft Corp. (MSFT), Oracle Corp. (ORCL), US Bancorp (USB) and several others. It did not close any positions.
The fund’s fairly concentrated portfolio of 25 stocks is largely invested in the consumer defensive, technology and consumer cyclical sectors. According to its fact sheet, the $14.7 billion fund slightly underperformed the S&P 500 in 2017 with a 20.03% return. The index returned 21.83%.
Disclosure: No positions.
