Yacktman: Blue Chips Still Selling Near 18-Year Lows

Even with the market up more than 90% off its 2009 lows, top fund manager Donald Yacktman says he’s still finding big values in big, blue-chip stocks.

“I don’t think the opportunities are anywhere near what they were two years ago,” Yacktman tells Barron’s. “But what is staggering to me is high-quality companies still selling at below-average prices on a [price/earnings multiple] basis, relative to the market. If you buy an above-average business with a below-average price, on average you are going to come out ahead. I have to go back a minimum of 18 years to find blue-chip or high-quality companies selling at these kinds of prices relative to other things out there. It is a very unique period.”

Yacktman also says inflation is coming, thanks to the Federal Reserve’s efforts to inflate the economy in order to stabilize real estate prices. But he says the companies he focuses on are those that have pricing power, and won’t be hit hard in an inflationary environment, “the kind of stuff that consumers buy whether the price of gasoline is $3 or $4 a gallon”. Among the holdings he discusses in the interview: News Corp., Exxon Mobil, Microsoft, and Procter & Gamble.