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Investing Specialists

Four Buy Ideas from Our Best Performing Manager

This Ultimate Stock-Picker made concentrated bets on outperforming stocks this year.

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By Swami Shanmugasundaram | Stock Analyst

While most of our Ultimate Stock-Pickers have yet to file their third-quarter holdings with the SEC, we continue to get the chance to sift through the holdings, purchases, and sales of managers who have posted their September 30th holdings through other means, much like we did last week with the  Oak Value Fund (OAKVX). This time around, we're taking a closer look at the portfolio of the  Yacktman Fund (YACKX), which has the unique distinction of being the best performing fund this year out of the 22 mutual funds that populate our Investment Manager Roster. The third quarter continued what has been a strong bout of performance for the fund, which once again beat the S&P 500 Index (SPX) with a return of 19% for the three months ended September 30th, versus a 16% gain for the benchmark. Meanwhile, during the first three quarters of 2009, the Yacktman Fund has not only bested the S&P 500 with a 48% return (as opposed to a 19% gain for the index), it has outperformed all of its mutual fund peers on our list of top managers, where the average return was closer to 21% over the same period.

For those not familiar with the fund's inner workings, the Yacktman Fund is managed by the father and son duo of Donald and Stephen Yacktman, who have amassed an impressive track record of beating the market over the years. The fund's investment style is fundamentally built around time-tested value investing principles that focus on companies that are inexpensive, have a solid business model with good cash flow, and are run by top-notch, shareholder friendly managers. Donald Yacktman believes that a good business is one that exhibits the following characteristics: (1) market leading position in its principal product or service, (2) products that have staying power and (3) business that should create recurring revenue opportunities (meaning that their products are ones that are repurchased frequently).

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.