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Yacktman Fund Rises When Stock Market Falls

Stocks in this article: YACKX YAFFX NWSA PEP PG MSFT JNJ

(Editor's note: TheStreet today named 111 mutual funds and exchange traded funds, or ETFs, winners and runners-up in its first annual awards ceremony. A list of the funds and related articles can be found on the awards page.)

BOSTON ( TheStreet) -- The Yacktman Fund's (YACKX) three managers have been on boards of publicly traded companies, giving them an insight that most of their peers in the investment industry lack.

"We've seen companies from the inside," says fund manager Donald Yacktman, who's managed money for more than four decades. "Learning the business model and learning how to value it are the critical variables."

Donald Yacktman: 'The starting point of any investment is the price.'

For the Yacktman Fund's managers, who also include Donald's son Stephen Yacktman and Jason Subotky, the top objectives are patience and diligence. They seek long-term capital appreciation with some attention focused on current income, combining the best features of growth and value investing.

Yacktman Fund gets a "buy" rating and a five-star grade from TheStreet Ratings, which indicates the fund has an excellent track record for maximizing performance while minimizing risk. Because of that, the Yacktman Fund won TheStreet's 2011 Best Mutual Fund award for the large-cap core category. The runner-up was Parnassus Workplace Fund (PARWX), run by Jerome Dodson.

"Ultimately, this business boils down to what you buy and what you pay for it," Donald Yacktman says by phone from his office in Austin, Texas. "The starting point of any investment is the price."

The Yacktman Fund returned an annual average of 9.9% in the three years through Dec. 31, even though the broader stock market plummeted almost 40% in 2008. It's up 5.8% this year. A hypothetical $10,000 investment made 10 years ago would have grown to $32,370 as of March 31.

"For our shareholders, it's not a function of making 12% a year. It's about how we got to the 12%," says Stephen Yacktman. "It matters that you didn't take massive, outsized, leveraged risks. It matters that it's not one big, giant position. In other words, the performance needs to be stable in a fairly diversified way so you don't need to wake up worrying."

The Yacktman Fund performed better than the broader stock market during the sharp downturns in 2008 and 2002. Both the Yacktman Fund and Yacktman Focused Fund (YAFFX) widely outperformed during market declines sparked by the dot-com bubble of 2002 and the last recession in 2008 and 2009.

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