Yacktman Speaks!

    Excellent Q&A with Donald Yacktman at gurufocus.com

    Yacktman Fund is at the the bottom of The MFM30 in alphabetical order, but way closer to the top in the Moron's affections.

    It's certainly not even vaguely amusing as a joke anymore because it's been overused so regularly, but as Consuelo Mack has pointed out, Yacktman is one of the few who follows the two cardinal rules of investing.

1. Don't lose money.

and

2. Never forget Rule #1.

    While in recent years, Yacktman has favored high quality, mostly dividend paying companies, it's not because he is married to the idea of quality at any price. He holds quality companies now because he believes that the market is offering them at compelling prices. The Moron wholeheartedly agrees with this assessment.

    Further, the Moron appreciates that Mr. Yacktman also understands that dividends in and of themselves are relatively unimportant, except as to the tax consequences. It is not the dividends, but the ability to pay dividends that matters - free cash flow. The company may choose to pay dividends, buy back stock, pay down debt, or just hold cash. It's that one other use of cash that Yacktman call "the wild card"  -- that is when the company reinvests in itself. That reinvestment may turn out to be spectacularly profitable,  or it might turn out to be a total destruction of capital, as in the process that Peter Lynch called "di-worse-ification".

A few high points:

• Yacktman says a goal is to achieve "approximately double digit annualized returns." It's rare and refreshing to hear a manager be so specific. MFM will conservatively estimate this to mean returns of 8 -12 % annualized.

• "If you buy an above average business at below average prices, then on average, it's going to work out." Hey, then you could be ABOVE AVERAGE!

• "I can't overemphasize the importance of patience."

• "No manager performs well in all environments." MFM is going to add that one to our list of potential mutual fund advertising slogans :)

• "We believe investors would be well served not to track us versus a benchmark over shorter time periods." Yea, probably true, but we just can't help ourselves.

• "What I don't understand is why anybody in their right mind would want to own a 30-year treasury today." MFM doesn't understand it either, Mr. Yacktman.

Here's the link:
http://www.gurufocus.com/news/187901/donald-yacktman-interview-with-gurufocus

Donald Yacktman