Procter & Gamble (PG), News Corp. (NWS) and Pepsi (PEP) Provide Favorable Return Relative to Treasuries

October 9, 2012

High-quality large-cap companies have a favorable relative rate of return compared to Treasury bonds, a favorite investment tool of long-term investors which has become somewhat overvalued, says Donald Yacktman, President and Co-Chief Investment Officer of Yacktman Asset Management LP.

“When you look at the rate of interest you get on long-term Treasuries, there is virtually no real return. When you look at a lot of these high-quality businesses, there’s an enormous spread to fixed income, so on a relative basis they are quite cheap. In fact, you get several of these large companies that are in our top 10 holdings where the dividend exceeds the 30-year Treasuries,” Yacktman said.

Yacktman’s favorite ideas are Procter & Gamble (PG), News Corp. (NWS) and Pepsi (PEP). He also likes Microsoft Corporation (MSFT), Cisco Systems (CSCO), Sysco Corp. (SYY), C.R. Bard (BCR) and Clorox Company (CLX).