Every investment has its season. During the 2008 meltdown, Treasury bonds offered the only safe harbor. Last year, gold was a big winner.
- Have demonstrated steady earnings and sales growth.
- Boast competitive advantages over rivals.
- Hang tough during economic slowdowns.
- Have little or no need to borrow money and often pay a dividend.
Here's the surprise: On average, the stocks of these best-in-breed companies are trading at about the same multiples to earnings, sales and assets as lower-quality, riskier fare. That's why I believe that blue chips, out of virtually all the stock categories, offer the greatest potential to improve your personal bottom line.
"For what you're getting, high-quality stocks are clearly cheaper than the rest of the market," says Yacktman, who shares management duties with his son Stephen and Jason Subotky. "Why would you buy the equivalent of a single-A bond when you can buy triple-A quality for the same price?"
Both Yacktman funds have delivered superb results. Over the past 10 years through the end of February, Yacktman Fund returned an annualized 14%. That compares with an annualized loss of 1% for the Standard & Poor's 500 Index ($INX).
Focused has performed equally well, but with the slightly greater volatility you'd expect from a more-concentrated fund.
The funds don't always focus on blue chips. During the 2008 debacle, they scooped up shares of troubled companies, includingand , and did well with them. But such stocks have become pricey, in the elder Yacktman's view.