Donald Yacktman’s funds have some of the best long-term track records one can find. And in his funds’ 2012 year-end letter, his team talks about a key part of their strategy: position sizing.

“We think position sizing is one of the most important aspects of good portfolio mangement,” the letter states (hat tip to GuruFocus.com for highlighting the letter). “We generally take bigger positions in higher quality, diverse companies that we think can acceptably compound capital at attractive rates of returns or securities that are extremely mispriced due to investor perception issues. At times you may see us take surprising positions in companies that have business challenges like Research in Motion, but we use our investment experience to determine when we can take a significant position weighting and when we should not.”

The Yacktman Focused Fund, which is in the top 1% of funds in its class over the past five years and past ten years, according to Morningstar, had almost 60% of its assets in its top ten holdings at the end of 2012, while for the Yacktman Fund (also in the top 1% of its class in those periods) the figure was over 50%. Both funds had the same top five holdings (though with slightly different orders/weightings): Procter & Gamble Co., News Corp., PepsiCo Inc., Cisco Systems, and Sysco Corp. For both funds, consumer staples was the biggest representative in terms of sector weighting.