Quarter 2, 2017 Investment Brief

As we look forward to the second half of 2017, we would like to introduce a mutual fund that we will be adding to portfolios going forward.  The AMG Yacktman fund (YACKX) invests primarily in large cap US stocks and exhibits the following characteristics that we look for in a mutual fund:

 -          Long-tenured management.  Co-portfolio managers Stephen Yacktman and Jason Subotky have been with Yacktman Asset Management since 1993 and 2001 respectively.  Stephen’s father Donald, who started the fund, currently serves in an advisory role to the management team.  Importantly, Stephen, Jason and Donald have significant amounts of their own money invested in the fund.  We believe it is crucial that fund managers “eat their own cooking” to ensure their interests are aligned with our clients’.

-          A patient, value-oriented investment philosophy.  The Yacktman investment philosophy can be summarized as looking for market-dominant businesses with shareholder-oriented management that are selling at low purchase prices.  The team will allocate capital to their best ideas, resulting in a focused portfolio that often looks out of step with the broad-based indices. 

-          Willingness to hold cash.  We would rather see a fund manager hold cash for the time being versus an over-priced stock.  When stock valuations are high, as they currently are, bargains are harder to find.  As a result, many of our funds are carrying higher levels of liquidity.  Yacktman, with nearly 23% in cash (as of 3/31/17), has plenty of dry powder available should prices become more attractive.

-          Strategy-validating performance.  When analyzing fund returns, we view the historical track record as a piece of confirming evidence: if a fund is truly practicing the value approach, it should show up in the performance over time.  Though shorter-term results have varied, Yacktman has outperformed the S&P 500 in about 97% of rolling 10-year time periods since inception (data from Morningstar, 7/31/02 – 6/30/17). 

 We have found that there are very few candidates that meet the stringent qualifications listed above.  After a thorough review process, we are convinced that AMG Yacktman is one such fund.  We look forward to speaking with you about specific recommendations for your portfolio; in the meantime, please call us with any questions.

 Aaron Pettersen, CFA, CFP®

The foregoing content reflects the opinions of NorthWest Financial Services and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any strategy will be successful.