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Dave Sather's Money Matters: Austin portfolio manager a humble man

Nov. 15, 2011 at 5:15 a.m.


By Dave Sather

Last week, my students at Texas Lutheran University got a well deserved break from listening to me yammer on and on.

Instead, the interns of Bulldog Investment Company invited in a man I have admired and respected for quite some time - Donald Yacktman.

From time to time, you can see Yacktman interviewed on CNBC or in the pages of Barron's or a variety of other financial publications. However, Yacktman is not about Wall Street.

Rather, Yacktman is a very humble man based in Austin. There is very little braggadocio about him. Instead, he lets the numbers and performance do the talking for him - and the numbers say quite a bit.

Yacktman has been a portfolio manager since 1968 and started his own firm almost 20 years ago. Today, the Yacktman Funds manages an impressive $12 billion. Over the past 10 years, Yacktman and his small team have produced returns which have more than tripled the returns of the S&P 500.

And yet, it almost seems too simple. Their top holdings are names like PepsiCo, News Corp, Microsoft, Proctor & Gamble, Coca-Cola and Johnson & Johnson.

Furthermore, he pays little attention to things like the economy or politics. Although he acknowledged that these are fun topics to discuss around the water cooler, managing investments is about understanding businesses, balance sheets, income statements and cash flow statements.

Yacktman also explained that he does not worry about short-term performance. Instead, they focus on beating the market over 10-year periods. During any 10-year cycle, there will be periods of volatility - something Yacktman loves.

In fact, he said, they want things to be as volatile as possible because that is when the really good opportunities present themselves.

However, the 10-year time frame allows them to work through short-term volatility and a full market cycle. He explained that if your time frame is long enough and you have the patience to hold on, the value associated with good companies will be reflected.

Yacktman also stated, "We don't care about things like the efficient market theory. The people who practice that give us plenty of opportunity to find above average companies selling for below average prices."

Although these strategies seem quite simple, Yacktman made sure to add that there is no reason to make things more complicated than they need to be.

More than 50 percent of the firm's assets are held in their top 10 ideas. Yacktman told the group that when you have done your homework, you shouldn't be afraid to back up the truck and load up on your best ideas.

However, for all of the wisdom Yacktman imparted on managing investments, possibly the most valuable advice he gave had very little to do with finance.

Instead, he offered two pieces of advice for success in life.

The first was the Three I's: Intelligence, Intensity and Integrity. He plainly stated that if you are willing to think, work hard and be honest, you can accomplish virtually anything you want in life.

Secondly, he stated that you need to find what you love. Donald Yacktman, who is 70 years old, said he still looks forward to going to work every Monday. Indeed, life can be very short and it is a miserable existence if you hate your job - so find your passion.

As Yacktman left, I noticed his car. He said it was actually his wife's car, but he drives it because it gets good gas mileage on the highway. As he told me this, I chuckled to myself and thought, "I love it - a man who manages $12 billion but still wants to save a nickel or two on his gas bill."

It is nice to see that there are a few good guys out there who let their actions speak for themselves and still value concepts like hard work, using your brain and staying honest. Being thrifty doesn't hurt either.

Dave Sather is a Victoria Certified Financial Planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.

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