Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
OFF TO A BAD START
Since it seemed Yacktman could do no wrong in 1991, everyone
had high expectations when he went out on his own. Many, including
the media, were sorely disappointed. The Yacktman Fund fell 6.6
percent during its first full year, compared to a gain of 10 percent for
the Standard & Poor’s 500 and 13.8 percent for the average growth
fund. All of a sudden, the same reporters who were praising Yacktman’s
stock-picking prowess months earlier were writing headlines
such as, “What Happened to Don Yacktman?” A $10,000 investment
in the Yacktman Fund on the day it was launched was worth only
$9,783 on December 31, 1993. By comparison, that same $10,000
invested in the S&P 500 would have grown to $11,756. In his 1993
annual report, Yacktman wrote, “Even though the fund suffered shortterm
pain earlier in the year as the market prices of several great
businesses we own fell to very low levels, we clearly now see the beginning
of long-term gains. Many of our earlier investments are now
showing gains as investors are starting to realize how valuable these
businesses are.”
In retrospect, Yacktman blames the lousy performance on Wall
Street’s delay in recognizing the value of the beaten-down drug and
consumer stocks that accounted for roughly half of his portfolio. “It
was typical of my style - short-term pain for long-term gain,” he insists.
“I go through the same thing every time the market shoots
straight up. In that kind of environment, I tend to lag badly.” That’s
easy to say now, but this was a man who had just gone out on his
own and was desperately trying to attract assets. Since investors, especially
novice ones, tend to follow performance, it makes sense few
would want to buy a fund that showed up at the bottom of the rankings.
That’s exactly where the Yacktman Fund found itself during its
rookie year of operation. “Honestly, we did answer the phone a lot
in 1993 fielding questions from people who were worried,” he now
admits. “But I truly felt my investors were more sophisticated and
understood that this bad period was just part of my process. My only
real fear in 1993 was that people who put their money in during 1992
would take it out at a loss. I didn’t want this to happen, because I
knew my performance would come back. The process I follow is logical
and sensible. It’s a low-risk approach to making money, but it requires
patience. As it turned out, more money came in than went out. I’m
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