Yacktman looks at stocks like they are bonds. If a bond [price] declines, its yield goes up. So if a stock declines, its forward rate of return goes up. Along these lines Yacktman equates the forward rate of return with a company's free-cash yield. He calculates this yield by estimating how much cash the company has left after spending what it needs to maintain its business, then adds in the cash he believes it can generate through growth and adjusts for the effect of inflation. That figure is then divided by the stock price.

Using this adjusted cash flow figure, Yacktman compares the stock's forward rate of return with yields on long-term Treasuries. Based on the spread between the two, he rates the stock. Deep discounts are the major factor that make or break a decision for Yacktman.