Donald Yacktman became something of an urban legend 10 years ago when the independent directors of the Yacktman Fund tried to oust him due to their dissatisfaction with his aversion to Internet and technology stocks—and the fund’s 16% decline in 1998 and 1999.
Now, however, Yacktman’s cautious, value-style approach has served him well, Bloomberg reports. Having moved nearly one-third of his portfolio into cash last year and sidestepped financials, his fund now ranks as the No. 1 equity fund in the 12 months ended June 30, having returned 24.4%.
By comparison, U.S. equity funds fell 39% in 2008, and that horrendous, devastating performance, combined with redemptions, drew equity mutual fund assets down to $4.01 trillion as of June 30, from $6.5 trillion at the start of 2008. And large fund houses have laid off more than 9,000 since last October.
Yacktman said he decided to avoid big financial companies because they are run like mysterious “black boxes.” Instead, he looks for companies with cash flows that can sustain an economic downturn and that are trading in a range lower than what they would sell for. He also likes companies that have a tendency to buy back shares.