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Posted 24 Feb 2001   For week ended February 02, 2001
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Sent on Mormon-News: 05Feb01

By Rosemary Pollock

Mormon Mutual Fund Manager Rides Fund From Boom to Bust

CHICAGO, ILLINOIS -- Don Yacktman's downtown Chicago office sports a large reproduction of a Frederic Remington sculpture of a cowboy astride a galloping horse. The sculpture represents rugged individualism and the freedom to follow a solitary but often rocky trail. The work reflects the trails that Yacktman has blazed in the financial world. Born a Westerner and raised and educated in Utah before graduating from Harvard Business School, Yacktman's money-management style is a combination of value investing and extreme patience.

However, his personal life is a straight line. Yacktman is an honorable, accomplished member of The Church of Jesus Christ of Latter-day Saints. He converted to the Mormon faith as a teenager and later became a bishop. He and his wife, Carolyn, have seven children. Their son Stephen, 30, is an analyst for his father's funds.

Yacktman, now 59, was named portfolio manager of the year by Morningstar in 1991. He was a favorite of no-load investors along with independent financial advisers and the press. In the 1980's he honed his skills for picking stocks that were cheap, tripling shareholders' money in eight years and was manager of Selected American Shares in the 80's. At his peak in 1997, he had $1.1 billion under management, but by September, 2000 his assets plunged to a mere $69 million. But Yacktman, like the cowboy on the horse, will not apologize or bend to trends.

"I'm the same Don Yacktman yesterday, today and tomorrow," he says. "I'll take the good business over the size factor any day," he adds. "You need to adapt to the environment if you want to succeed. And in the past few years it's changed. The clear-cut choices among large companies got overpriced."

Downsizing was awkward and complicated matters as the Yacktman fund prospectus explicitly stated the fund would invest primarily in larger companies. As performance deteriorated, the funds independent directors decided they needed to defend the interests of the shareholders. One director who challenged Yacktman was Stanislaw Maliszewski. "We weren't trying to trying to out-Yacktman Yacktman or second-guess him," he said. "It's not illegal to invest in smaller companies, but you have to tell the shareholders you're doing it and change the prospectus," Maliszewski said.

Yacktman disagreed and what insued was a nasty dog fight. "Investors know my strategy," says Yacktman. "They know we may be concentrated in different sectors and stocks than everyone else, depending on what we see." Russell Wilkins, a fund analyst for Yacktman defended his boss. "Our investors are people who've watched Don Yacktman invest for a long period of time and are more interested in buying his style than any style box," he said.

It is hard to imagine that give his investment discipline Don Yacktman could have avoided such a crisis. "In a theoretical sense, it's noble of Yacktman to have stuck with his style throughout it all," says Morningstar's Phillips. "When your style goes out of favor, that's the time you've got to believe the most. Yacktman has continued to be a true believer."

Today, Yacktman sees few bargains among larger stocks and no good buys among tech stocks. "Someone always comes up with a better mousetrap." Instead, he remains confident. "We have confidence that we're doing it right," says Yacktman. "Then and now."


Don Yacktman's Wild Ride
Kiplinger's Personal Finance 1Feb01 B2
By Brian P. Knestout
A manager once hailed as a genius made some wrong turns and refused to budge. He remains unrepentant.


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