Mason Hawkins

Mason Hawkins

Last Update: 04-10-2017

Number of Stocks: 30
Number of New Stocks: 2

Total Value: $10,359 Mil
Q/Q Turnover: 5%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Mason Hawkins Watch

  • Longleaf Partners Small Cap Fund Comments on Rayonier

    We also sold timber REIT Rayonier (NYSE:RYAM) late in the quarter after the company issued equity at a price that reinforced our assessment that the stock was at or near fair value. Over the three years we held the stock, a challenging timber environment hindered value growth, and while the discount we paid plus the dividend helped preserve our capital, our 12% total return was less than we anticipated.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Tribune

    Our second time owning media company Tribune (NYSE:TRCO) was not nearly as gratifying as our first successful investment in the company’s bonds as it came out of bankruptcy. This time, our value declined due to disappointing results at the TV division, a weak spectrum auction, and a lack of value growth from other assets. Our small positive return amid these disappointments speaks to the margin of safety in our initial purchase.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Graham Holdings

    Graham Holdings (NYSE:GHC) (+17%; +0.95%), the media, education, and services company, was another contributor in the quarter. The Kaplan International segment reported relatively good results for the first time since 2015 and showed signs of having bottomed out as cost cuts should kick in this year. Graham’s TV segment continued to deliver industry-leading results, and the market began to anticipate TV consolidation opportunities under a less regulatory administration. We applaud CEO Tim O’Shaughnessy for buying back a meaningful amount of stock at discounted prices last year, and we are excited about his ability to go on offense with Graham’s formidable balance sheet.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+33%, +1.78%), the luxury gaming and hotel operator with prime properties in Las Vegas, Macau, and Boston, was the largest contributor in the quarter. Macau’s rebound continued, as that market now has grown for several months, some at double-digit rates. Wynn’s Palace property is ramping up from non-earning status more quickly than expected and gaining share as the premium property in Macau. Las Vegas continues to be a steady market, and the company is making progress on developing and monetizing its under earning golf course land. Wynn also is likely to benefit from the NFL coming to Las Vegas. Construction on the Boston resort is moving ahead as planned. Wynn has a large amount of optionality, and we are confident that CEO Steve Wynn and his team can maximize our outcome. Given the price strength and the position size, we trimmed the stock in the quarter.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners First Quarter 2017 Small-Cap Fund Commentary

    Longleaf Partners Small-Cap Fund gained 3.93% in the first quarter and outperformed the Russell 2000 Index’s 2.47%. Our absolute return surpassed our annual absolute goal of inflation plus 10%, continuing the strong performance from 2016. We exceeded the market’s return thanks to strong performance from key holdings and pullbacks from some of the “Trump rally” highfliers that we did not own.

      


  • Longleaf Partners Comments on DuPont

    In addition to selling Ralph Lauren, we also exited DuPont (NYSE:DFT) in the quarter. We earned a 60% gain in DuPont when price reached our appraisal. We bought the stock in August 2015 when questions surrounded both the business quality and management, but we believed the board, which was under shareholder pressure, would address the company’s leadership, cost structure, and capital allocation to help the conglomerate focus on its more dominant, growing segments. The businesses performed solidly, and the arrival of CEO Ed Breen with his cost cutting plans and smart merger with Dow turned the investment into a success. We will continue to watch the company and its spinoffs going forward.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on Ralph Lauren

    Ralph Lauren (NYSE:RL), (-15%; -0.62%), the upscale retail brand, declined following the departure of CEO Stefan Larsson after less than two years at the helm. Our case was built on the potential for Larsson and Lauren to form a complimentary business and creative team, and the early results were promising as they cut costs and rationalized unnecessary stock keeping units. But when these two leaders were not able to coexist, a big part of our case changed. Rather than wait to see if the operating plan could continue without Larsson’s guidance, we sold our position. The disappointing outcome had only a minor impact on our return during our seven month investment period because of the operating progress the company made in a short period and because we have begun sizing new investments at less than a full 5% position while we gain more in-depth knowledge of the business and people as an owner.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on Chesapeake Energy

    Chesapeake Energy (NYSE:CHK) (-15%; -0.70%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the largest detractor in the quarter. At the macro level, declines in oil and gas prices pressured the stock. We use the futures strip for both commodities in our appraisal of Chesapeake, even though they are currently trading below the global energy industry’s long run marginal costs. CEO Doug Lawler further improved the company’s financial strength and flexibility, closing two Haynesville deals and reporting another solid operational quarter. We believe he and his team will continue to execute additional asset sales and maintain both operating and capital expense discipline.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on LafargeHolcim

    LafargeHolcim (LHN) (+13%; +0.60%), the world’s largest global cement, aggregates, and ready-mix concrete producer, also added to the Fund’s return. The company’s 4Q results demonstrated continued success in pricing, operating cost control, and disciplined capital spending which helped earnings before interest, tax, depreciation and amortization (EBITDA) grow 15.5% and free cash flow increase 107%. For 2017, Eric Olsen guided to 2-4% volume growth helped by resumed growth in India and Latin America and continued volume growth in the U.S. Improved volumes combined with pricing and cost controls should drive double-digit EBITDA growth and strong free cash flow (FCF) generation. FCF along with divestitures has fortified LafargeHolcim’s balance sheet, and the competitive landscape is positive with few slated capacity additions. We expect dividends and share repurchases to accelerate as cash flow grows.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on CNH Industrial

    CNH Industrial (NYSE:CNHI) (+11%; +0.61%), the maker of agricultural equipment, commercial vehicles and construction equipment, was another contributor in the quarter. The company once again reported higher pricing in the core agricultural equipment segment at a time of down units. We applaud CEO Rich Tobin for good cost controls, as margins came in better than we expected. There are early signs that the agricultural market is stabilizing after years of decline. When demand for equipment turns, the company’s strong incremental margins will be working in our favor. We believe that management and the board are open to further rationalizing the company’s assets, as our vested partners, large owner John Elkann and Chairman Sergio Marchionne, have done at other investments in the past.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners 1st Quarter Commentary

    Longleaf Partners Fund gained 3.90% in the first quarter, meaningfully exceeding our absolute annual return goal of inflation plus 10%, but falling short of the S&P 500 Index’s 6.07%. This performance followed almost 900 basis points of benchmark outperformance as well as strong absolute results in 2016. In the quarter, we saw value growth and stock appreciation at some of our higher weighted investments.

      


  • Longleaf Partners Funds First Quarter 2017 Shareholder Letter

    We are pleased to report that in the first quarter of 2017, all four Longleaf Partners Funds continued to make good progress toward delivering our annual return goal of inflation plus 10% following substantial absolute results in 2016 as well as benchmark outperformance by the Partners, International and Global Funds. The Small-Cap, Global, and International Funds exceeded their respective benchmarks — the Russell 2000, MSCI World, and MSCI EAFE indices — in the quarter, and although compounding at a strong rate, the Longleaf Partners Fund fell short of the S&P 500 Index after substantially outperforming the previous twelve months.


    The large majority of our holdings across all of the Funds posted positive returns that reflected company-specific progress. Our two gaming-related investments —Wynn Resorts in the Partners, Small-Cap, and Global Funds and Melco International and K. Wah International (through its partial ownership of Galaxy) in the Global and International Funds — were among our most substantive performance contributors. Macau, where these companies operate, continued to grow, with industry gross gaming revenue accelerating above consensus estimates in the last two months to approximately 18% growth year-over-year.

      


  • Mason Hawkins’ Southeastern Asset Management Sells Out of Rayonier

    Mason Hawkins (Trades, Portfolio)’ Southeastern Asset Management sold out of Rayonier Inc. (NYSE:RYN) on March 31.


    Hawkins has served as Southeastern’s chairman and CEO since its inception in 1975. His firm also manages the Longleaf Partners fund. The investment team uses an in-depth, fundamental approach to find strong companies with good management that are trading at a discount.

      


  • Southeastern Asset Management Gains 2 New Holdings, Adds to Several Others

    During fourth-quarter 2016, Mason Hawkins (Trades, Portfolio)'s Southeastern Asset Management bought the following stocks:


    The firm purchased 3,527,014 shares of T. Rowe Price Group Inc. (NASDAQ:TROW), establishing a new position. The trade had an impact of 2.56% on the portfolio.

      


  • Mason Hawkins Sells Chesapeake, FedEx, Alphabet

    Mason Hawkins (Trades, Portfolio) has been chairman and CEO Southeastern Asset Management since 1975. He manages a portfolio composed of 30 stocks with a total value of $10.359 billion. During the fourth quarter the guru sold shares in the following stocks:


    The investor reduced his stake in Chesapeake Energy Corp. (CHK) by 46% and with an impact of -2.55% on the portfolio.

      


  • Longleaf Partners Small-Cap Fund Comments on OCI

    OCI (XAMS:OCI) (-28%, -0.69%), a global fertilizer and chemical producer, was the largest detractor in the Fund for the year, even after a rebound of 18% in the fourth quarter. The two main pressures on the share price were weakness in nitrogen fertilizer prices and the cancellation of the CF Industries merger as a result of the U.S. government crackdown on tax inversions. Despite depressed fertilizer prices, nitrogen remains an essential part of global food production, and global demand is growing by around 2%, which will help deplete the current excess supply by 2018. Given the high cost and long lead time of building a new plant, it is unlikely that new capacity will be built in the medium term. OCI owns the newest and most efficient nitrogen fertilizer plants in the industry, with its large, new Iowa plant now producing. Its Texas Greenfield methanol plant comes online in late 2017. OCI recently initiated a cost savings plan over $100 million, $65 million of which is executed, and the company has completed the majority of its large capital expenditures. We expect significant earnings production in the coming two years, and CEO Nassef Sawiris and his team are working diligently to grow value per share. In early December, the company announced a 25% premium offer to acquire all publicly held shares of OCI Partners in exchange for OCI shares. The acquisition should allow for operating synergies between methanol assets and incremental free cash flow with a positive impact on the combined balance sheet in 2017.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund Comments on Level 3 Communications

    Level 3 Communications (NYSE:LVLT) (+4%, +0.19%), a global fiber and integrated communications network company was the primary contributor to the Fund’s fourth quarter return with a 22% gain. The stock rose with the announcement of a merger with CenturyLink, Inc., equating to $66.50 per Level 3 share, a 42% premium to the closing price prior to the announcement. This deal offers numerous benefits for shareholders. The combined company will increase the capacity and reach of CenturyLink’s domestic and Level 3’s global high-bandwidth fiber networks.


    Although CenturyLink has been tainted by the performance of its legacy landline business, its Qwest fiber network is a high quality asset. Projected synergies total $975 million, with $125 million in reduced capital expenditures and the remaining $850 million split in half between operating expense reductions and moving data usage onto the company’s own network. Additionally, Level 3 will get four directors on the new board. CenturyLink CEO Glen Post has announced that the new CFO will be Sunit Patel who has successfully integrated large acquisitions and managed balance sheets well in his tenure at Level 3.

      


  • Longleaf Partners Small-Cap Fund Comments on Scripps Networks

    Scripps Networks (NASDAQ:SNI) (+31%,+1.51%), the media company whose three main brands are HGTV, Food Network and Travel Channel, had solid advertising revenue gains during the year, and the stock continued its rise in the fourth quarter, gaining 13%. Ratings were strong overall in 2016, and HGTV ended up as the third most watched U.S. cable channel behind ESPN and Fox News. The company’s advertising has more exposure to stable categories than most competitors and also earns premiums per viewer over the competition. The year did see a decline in distributor fees paid to Scripps, but this was due to one-time items that will be lapped next year. Part of the stock’s discount is related to international expansion which has not yet produced profits but has created startup costs and non-cash amortization. Scripps’ high-profile lifestyle channels could be valuable content for other media and entertainment companies, as evidenced by AT&T’s recent bid for Time Warner at an attractive multiple relative to Scripps’ stock price.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+27%; +1.67%), the luxury gaming and hotel operator with prime real estate in Las Vegas, Macau, and Boston, was another significant contributor during the year despite a slight retreat in the fourth quarter. The total Macau market reported higher gross gaming revenues year-over-year in most months of the second half, indicating stabilization and a return to growth. In August, the company opened the Wynn Palace in Cotai (Macau). The property has ramped up more slowly than some analysts had hoped, but Wynn has a history of careful openings and eventual success. During the fourth quarter, sentiment shifted up and down, as some positive industry level data points were offset by concerns over Chinese policy changes that could potentially impact Macau indirectly. In the U.S., Las Vegas had solid results, and the company received the final licenses necessary to begin construction of Wynn Boston Harbor, which is expected to open in 2019. Wynn also announced plans to develop part of its Las Vegas golf course property into a hotel, restaurants, and other attractions. In December, the company sold 49% of its retail assets in Las Vegas for over twenty times EBITDA, which was accretive to our value and well above where the stock trades. The sale was also further evidence of how our heavily-aligned partner, Steve Wynn, continues to build value per share and pursue value recognition for shareholders.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund Comments on Liberty Media Corp

    Liberty Media Corp. (+79%; +3.36%), a holding company for a broad range of entertainment businesses, was an additional large contributor to the Fund’s return in 2016 and rose 11% in the fourth quarter. We initiated the position in the second quarter when “old Liberty Media” spun out three tracking stocks, including Liberty Media Corp. (LMCK). LMCK’s main asset immediately post-spin was 34% of Live Nation Entertainment, the largest ticketing and live entertainment company in the world. Live Nation reported solid results throughout the year. Shortly after our purchase of Liberty Media, the company announced its acquisition of a controlling interest in Formula One Group, which is now LMCK’s most important asset. Formula One adds to LMCK’s properties a global, live sports brand with over 400 million unique viewers, and its worldwide races generate long-term contracted revenue from broadcasting, event fees, and advertising. A key part of the acquisition was the appointment of Chase Carey as Formula One Group Chairman. Southeastern successfully partnered with Carey previously, and we are thrilled to partner with him again, as his experience as one of the smartest people in sports media directly relates to the Formula One opportunity. Upon the anticipated first quarter 2017 closing of the acquisition, Liberty Media Corp. will be renamed Formula One Group. Our past investments with Chairman John Malone and CEO Greg Maffei have been rewarding, and we expect this opportunity to partner with these superior capital allocators to continue to benefit the Fund.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) (+131%; +3.55%), the natural gas and Appalachian coal company also contributed large gains over the year. CEO Nick Deluliis, management, and the board, led by Chairman Will Thorndike, monetized assets and continued to cut costs in the pursuit of separating the coal and gas businesses which is expected to happen in 2017. Following the disposition of its metallurgical coal assets in the first half of the year, CONSOL sold its high cost Miller Creek and Fola thermal coal mines to a private buyer at a price above our appraisal. The company also delivered positive free cash flow (FCF) for the year, which many thought very unlikely at the start of 2016. In the fourth quarter, CONSOL announced the unwinding of a joint venture with Noble Energy in which the company received $205 million in cash from Noble while maintaining ownership of valuable earnings before interest, taxes, depreciation, and amortization (EBITDA) producing properties. Recent transactions involving other companies’ gas assets in Appalachia, as well as CONSOL’s own midstream master limited partnerships’ (MLP) prices, support our appraisal of CONSOL which is much higher than the stock price.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund Comments on Dreamworks Animation

    DreamWorks Animation (NASDAQ:DWA) (+55%, 5.06%), the film studio and multimedia company, was the Fund’s largest contributor for the year. We sold the position in the second quarter after Comcast announced an all cash acquisition for $41 per share. We started buying DreamWorks in the third quarter of 2014 at $19 per share following disappointing new movie releases. Our appraisal hinged on the valuable film library and DreamWorks’ growing success in TV and web content, as well as licensing. We partnered with a strong board led by Chairman Mellody Hobson and owner-operator CEO Jeffrey Katzenberg, who built the company’s brands, developed a presence in China, managed costs, and ultimately monetized the company at full value with a 104% return for the Fund during our two year holding period.


    From Longleaf Partners Small-Cap Fund fourth-quarter 2016 commentary.

      


  • Longleaf Partners Small-Cap Fund 4th Quarter Commentary

    Longleaf Partners Small-Cap Fund delivered a substantial return of 20.48% in 2016, following a 3.88% gain in the fourth quarter. The Fund far outpaced the Russell 2000 Index throughout the year until the November presidential election sent the index soaring over 13%, catching up with the Small-Cap Fund to deliver 8.83% in the fourth quarter and 21.31% for the year. Our 2016 risk adjusted absolute and relative returns were impressive given that our cash balance averaged 23% throughout the year. The Fund’s longer-term results have materially outpaced the index.

      


  • Longleaf Partners Comments on T. Rowe Price

    We were able to buy two new investments in the Fund—Ralph Lauren in the second quarter and T. Rowe Price (NASDAQ:TROW) in the fourth. TROW is a diversified investment advisory firm with a dominant position in U.S. target date fund retirement assets, which account for about twenty percent of assets under management (AUM). TROW’s funds have performed well and had net inflows, even with the active management headwinds the industry has faced. Over the last ten years, the company has put capital into building its international investments and distribution. The company currently has just below twenty percent of AUM in international funds and a mid-single digit percent of total AUM coming from offshore investors. As this business grows, margins should rise accordingly. The company’s balance sheet has net cash, and we are confident in the aligned management team who has a record of prudent capital allocation


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on CK Hutchison

    CK Hutchison (HKSE:00001) (-14%; -1.59%), a global conglomerate comprised of five core businesses (retail, telecommunications, infrastructure, ports, and energy), was the Fund’s only noteworthy detractor for the year. The stock declined in the first half of 2016 in the wake of the rejection by European regulators of its acquisition of U.K. telecom company O2, in addition to Brexit which created concerns about the impact on the company’s sizable operations in Europe and the U.K. Following a strong third quarter where the company announced a merger creating the largest Italian mobile operator, the stock lost ground in the fourth quarter after the U.S. election. A stronger U.S. dollar and expectations of tougher trade weighed on Hong Kong stocks in general and on the Hong Kong dollar’s relationship to the British pound and euro, where over half of the company’s earnings before interest and taxes (EBIT) originate. Our owner-operator partners, Victor Li and his father Li Ka-shing, continued to focus the company on its core competencies by selling its aircraft leasing business during the quarter.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on Level 3 Communications

    Level 3 Communications (NYSE:LVLT) (+4%; +031%), a global fiber and integrated communications network company was the primary contributor to the Fund’s fourth quarter return. The stock rose 22% with the announcement of a merger with CenturyLink, Inc., equating to $66.50 per Level 3 share, a 42% premium to the closing price prior to the announcement. This deal offers numerous benefits for shareholders. The combined company will increase the capacity and reach of CenturyLink’s domestic and Level 3’s global high-bandwidth fiber networks. Although CenturyLink has been tainted by the performance of its legacy landline business, its Qwest fiber network is a high quality asset. Projected synergies total $975 million, with $125 million in reduced capital expenditures and the remaining $850 million split in half between operating expense reductions and moving data usage onto the company’s own network. Additionally, Level 3 will get four directors on the new board. CenturyLink CEO Glen Post has announced that the new CFO will be Sunit Patel who has successfully integrated large acquisitions and managed balance sheets well in his tenure at Level 3.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on Scripps Networks

    Scripps Networks (NASDAQ:SNI) (+32%,+1.92%), the media company whose three main brands are HGTV, Food Network, and Travel Channel, had solid advertising revenue gains during the year, and the stock continued its rise in the fourth quarter, gaining 13%. Ratings were strong overall in 2016, and HGTV ended up as the third most watched U.S. cable channel behind ESPN and Fox News. The company’s advertising has more exposure to stable categories than most competitors and also earns premiums per viewer over the competition. The year did see a decline in distributor fees paid to Scripps, but this was due to one-time items that will be lapped next year. Part of the stock’s discount is related to international expansion which has not yet produced profits but has created startup costs and non-cash amortization. Scripps’ high-profile lifestyle channels could be valuable content for other media and entertainment companies, as evidenced by AT&T’s recent bid for Time Warner at an attractive multiple relative to Scripps’ stock price.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on FedEx

    FedEx (NYSE:FDX) (26%; 2.16 %), the global transportation and logistics company, was also a leading contributor for 2016 after gaining 7% in the fourth quarter. The company raised guidance for fiscal year 2017 and continued to buy back its discounted shares. Our appraisal increased as expense reductions in Express over the last several years helped raise margins. Investing in growth at Ground depressed margins in that division but should have meaningful payoff longer term. The TNT acquisition, finalized in May, should materially benefit profitability by increasing the final mile density of FedEx’s business across Europe. Management indicated that the integration of TNT should generate at least $750 million of annual synergies across its network over the next few years. We believe that CEO Fred Smith and his capable leadership team will continue to drive value growth for shareholders.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+28%; +2.29%), the luxury gaming and hotel operator with prime real estate in Las Vegas, Macau, and Boston, was another significant contributor during the year, despite a slight retreat in the fourth quarter. The total Macau market reported higher gross gaming revenues year-over-year in most months of the second half, indicating stabilization and a return to growth. In August, the company opened the Wynn Palace in Cotai (Macau). The property has ramped up more slowly than some analysts had hoped, but Wynn has a history of careful openings and eventual success. During the fourth quarter, sentiment shifted up and down, as some positive industry level data points were offset by concerns over Chinese policy changes that could potentially impact Macau indirectly. In the U.S., Las Vegas had solid results, and the company received the final licenses necessary to begin construction of Wynn Boston Harbor, which is expected to open in 2019. Wynn also announced plans to develop part of its Las Vegas golf course property into a hotel, restaurants, and other attractions. In December, the company sold 49% of its retail assets in Las Vegas for over twenty times EBITDA, which was accretive to our value and well above where the stock trades. The sale was also further evidence of how our heavily-aligned partner, Steve Wynn, continues to build value per share and pursue value recognition for shareholders.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) (+131%; +3.96%), the natural gas and Appalachian coal company, also contributed large gains over the year. CEO Nick Deluliis, management, and the board, led by Chairman Will Thorndike, monetized assets and continued to cut costs in the pursuit of separating the coal and gas businesses which is expected to happen in 2017. Following the disposition of its metallurgical coal assets in the first half of the year, CONSOL sold its high cost Miller Creek and Fola thermal coal mines to a private buyer at a price above our appraisal. The company also delivered positive free cash flow (FCF) for the year, which many thought very unlikely at the start of 2016. In the fourth quarter, CONSOL announced the unwinding of a joint venture with Noble Energy in which the company received $205 million in cash from Noble while maintaining ownership of valuable EBITDA-producing properties. Recent transactions involving other companies’ gas assets in Appalachia, as well as CONSOL’s own midstream master limited partnerships’ (MLP) prices, support our appraisal of CONSOL, which is much higher than the stock price.


    From Longleaf Partners' fourth quarter 2016 commentary.

      


  • Longleaf Partners Comments on Chesapeake Energy

    Chesapeake Energy (NYSE:CHK) (+377%; +8.46%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the Fund’s top contributor to performance in 2016 and gained an additional 12% in the fourth quarter. Earlier in the year, we transitioned our equity position into heavily discounted bonds and convertible preferred stock, which offered equity-like returns higher in the capital structure and a potentially faster payback. As the bonds rose close to par, we exited them. At the end of the third quarter, we converted all of our appreciated preferred securities into common stock for an attractive premium. Over the course of the year, management executed beyond expectations, selling various assets, improving the balance sheet through discounted debt repurchases, reducing operating and capital expenditures, and renegotiating midstream contracts. The most recent asset sales in the fourth quarter included a portion of the company’s properties in the Haynesville Shale in northern Louisiana for proceeds of approximately $915 million. Signed or closed asset sales reached $2.5 billion in 2016, exceeding management’s original target of $1 billion. To further strengthen its balance sheet, the company secured a term loan and convertible debt offering, which raised more capital at better terms than expected. Since the beginning of 2012, Chesapeake has reduced debt by 50%, and its remaining fixed liabilities should be well covered in the coming years. The company has targeted a two times net debt over earnings before interests, taxes, depreciation, and amortization (EBITDA) with cash flow neutrality by 2018 and 5 to 15% of annual production growth by 2020. We salute CEO Doug Lawler and Chesapeake’s board, with Brad Martin as Chairman, for their successful pursuit of shareholder value in the face of massive headwinds.

      


  • Longleaf Partners Fund Commentary 4th Quarter

    Longleaf Partners Fund made substantial gains throughout the year, rising 20.72% in 2016, a large premium over the S&P 500’s 11.96% return. The Fund’s outperformance began in mid-February and occurred in spite of higher-than-normal cash in the portfolio. In the fourth quarter, the Fund appreciated 2.03% while the S&P 500 added 3.82%, most of which came following the presidential election.

      


  • Longleaf Partners 4th Quarter Shareholder Letter

    We are pleased to report that 2016 was a great year for the shareholders of the Longleaf Partners Funds. All four Funds delivered strong absolute results, three outperformed their indices by a wide margin, and each Fund ended the year well-positioned for the future. We produced good returns because: the competitive advantages of our businesses built organic value growth; our corporate leaders made intelligent capital allocation decisions that meaningfully augmented value; the market began to recognize our companies’ higher intrinsic worth; and, we positioned the Funds’ portfolios to maximize returns while limiting downside. We are highly confident the Funds will continue delivering excess returns because the quality and leadership of our investees should drive additional value accretion and because of market factors that appear more favorable to our bottom-up, valuation based investment approach.


    Our most widely held and more heavily weighted holdings across the Funds are uniquely long-term investments that we know very well. These companies1, like Level 3 Communications, FedEx, CK Hutchison, Cheung Kong Property, EXOR, CNH Industrial, Graham Holdings, LafargeHolcim, and Liberty Media, all have growing competitive advantages, highly capable management partners, and cash-generative businesses that should continue to grow their values per share. This group trades at a very attractive average multiple of 11 to 12 times our calculated 2017–18 earnings power versus the S&P 500’s 16 to 17 times and MSCI EAFE’s 14 to 15 times current price-earnings (P/E) multiple based on next twelve month estimates.

      


  • Fairholme, Longleaf Overcome Painful Year to Lead Best Funds of 2016

    The peaks and valleys that define the chart of the Fairholme Fund (Trades, Portfolio)’s performance jutted to a new summit in 2016, proclaiming to investors that a mere $10 laid in the hands of Bruce Berkowitz (Trades, Portfolio) in 2000 would be worth $62.21 today. Far below, at base camp, investors entrusting the same amount to the comparatively plodding and oxygen-starved S&P 500, after clocking another year in its hike, get $20.84 back.


    Such was the year of fresh wind not just for Berkowitz, but another popular value fund, Mason Hawkins' (Trades, Portfolio) Longleaf Partners. Most of their returns are owed to stock picking. A generally verdant environment for underpriced equities offered a dose of help, too, as U.S. large cap equity value funds raised the average bar to 15.1% in returns, as measured by Morningstar, year to date. Fairholme topped it with a 26.7% return and Longleaf with 21.62%. Their performance placed them among the best 10 large-cap stock funds of 2016, according to Kiplinger

      


  • Mason Hawkins Extends His Kodak Moment

    Mason Hawkins' (Trades, Portfolio) Southeastern Asset Management added to its position in Eastman Kodak Co. (NYSE:KODK) by 2,704.52% on Nov. 30.


    Hawkins is the CEO and chairman of Southeastern, which he founded in 1975. His firm manages the Longleaf Partners Fund. The firm relies on in-depth, fundamental research to find strong businesses that are discounted and have good management.

      


  • Mason Hawkins Adds to FedEx

    Guru Mason Hawkins (Trades, Portfolio) added 241,024 shares of FedEX (NYSE:FDX) for an average price of $163.73 per share during the third quarter. The trade had a 0.4% impact on Southeastern Asset Management’s portfolio, a global investment firm Hawkins manages and founded in 1975.


    FedEx’s market price has climbed an estimated 19% since the third quarter. Since the first quarter of 2010, Hawkins has gained an estimated 77% with his investment in FedEx.

      


  • Mason Hawkins Goes 3 for 3 in 3rd Quarter

    Southeastern Asset Management’s Mason Hawkins (Trades, Portfolio) acquired three new holdings and sold out of three others in the third quarter.


    Hawkins founded Southeastern in 1975 in Memphis where he currently serves as chairman and CEO. He and his partners manage the Longleaf Partners Fund. The firm follows an investment process that relies on in-depth, fundamental research. It believes the key to success is high-conviction investing for the long term in businesses that are strong, deeply discounted and have good management.

      


  • Mason Hawkins Boosts Chesapeake, Buys Alphabet

    Mason Hawkins (Trades, Portfolio) has been chairman and CEO of Southeastern Asset Management since 1975. During the third quarter the guru’s largest trades were as follows:


    His stake in Chesapeake Energy Corp. (CHK) saw a strong increase of 260.26% with an impact of 4% on the portfolio.

      


  • Lemon Juice, Knights and Hybrids


    Being a hybrid maker off and on over the years, I'm very comfortable with the idea and have been the subject of quite a few pretty good mashups myself.” – David Bowie

      


  • Insider Invests in GTx

    The Pyramid Peak, a charitable organization that was founded by guru Mason Hawkins (Trades, Portfolio), purchased 7,716,049 shares of GTx Inc. (NASDAQ:GTXI) for 81 cents per share Oct. 14, according to a Form 4 filing with the Securities and Exchange Commission.


    GTx is headquartered in Memphis, Tennessee. It is a biopharmaceutical company that is dedicated to the discovery, development and commercialization of small molecules that selectively modulate the effects of certain hormones produced by the body. The company is developing selective androgen receptor modulators also referred to as SARMs – to potentially treat a number of serious diseases including breast cancer, stress urinary incontinence and Duchenne muscular dystrophy.

      


  • Southeastern Asset Management Comments on Level 3 Communications

    Level 3 Communications (NYSE:LVLT) (-10%; -0.6%), the global fiber and integrated communications network company, was the Fund’s primary detractor in the third quarter. In spite of disappointing flat revenue growth, our appraisal increased with the company’s reported higher free cash flow coupon. In local currencies, the company’s Enterprise business grew across regions, with a particularly strong 10% rate in Latin America. Currency translations, however, created a significant drag in the quarter, turning Latin American and Europe, Middle East, Africa (EMEA) reported top line results negative. More importantly, total EBITDA in the quarter, as well as projections for the remainder of 2016, were exactly in line with expectations. The company’s growing cash position after over $260 million of free cash flow (FCF) in the quarter took net leverage to 3.5X EBITDA. We remain confident that CEO Jeff Storey and his team will continue to execute and will ultimately close the gap between the stock price and corporate value.


    Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) (+19%; +1.1%), the natural gas and Appalachian coal company, added to the Fund’s return. CEO Nick Deluliis and the board, led by Chairman Will Thorndike, continued to pursue monetization of assets with the goal of ultimately separating the coal and gas businesses. Following the disposition of its metallurgical coal assets in the first half of the year, CONSOL sold its high-cost Miller Creek and Fola mines to a privately owned buyer who valued them higher than we did. The company also lowered costs across all segments and delivered positive free cash flow once again. Higher coal and gas prices drove strong returns at CONSOL’s holdings in coal master limited partnership (MLP) CNXC and midstream pipeline MLP CNNX. Sales of other companies’ exploration and production assets in Appalachia highlighted the value of CONSOL’s assets.


    Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on CK Hutchison

    CK Hutchison (HKSE:00001) (+18%; +1.1%), the Hong Kong-based global conglomerate, was a top performer in the quarter. Following the initial shock of Brexit in late June, the company’s limited impact from a weaker pound became more apparent. Regulators rejected the company’s proposed acquisition of O2 by its UK mobile phone business Three UK, but CK Hutchison received approval in September for the merger of Three Italia with Wind in a 50/50 joint venture between CK Hutchison and VimpelCom. This combination will create the largest mobile operator in Italy with approximately 37% market share versus the two remaining primary competitors. CK Hutchison expects at least 5 billion euros of synergies from this merger, with most to be delivered within three years of the transaction closing in the fourth quarter of 2016. These projected synergies exclude any upside from selling assets and spectrum, utilizing tax losses, or refinancing expensive debt. CK Hutchison’s European businesses grew nicely, and the company expects to see solid global growth, particularly in its telecom and retail segments. Li Ka-shing and his son, Victor, continue to build value for shareholders.


    Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on FedEx

    FedEx (NYSE:FDX) (+15%; +1.2%), the global transportation and logistics company, was a leading contributor. The company reported strong results across the board, with an increase in margins in its Express and Ground divisions. Ground had 10% growth in average daily volumes year-over-year and announced a price increase of 4.9% in 2017, once again demonstrating the company’s strong pricing power even in a time of low inflation.


    Management indicated that the integration of TNT, which the company acquired in May of this year, would generate at least $750 million of annual synergies across its network over the next few years. The company’s tax rate should also benefit from more profits based in Europe. The company raised guidance for fiscal year 2017 and continued to buy back shares. Our appraisal increased, and in spite of the price appreciation, the stock remains significantly discounted.

      


  • Southeastern Asset Management Comments on LafargeHolcim

    LafargeHolcim (XSWX:LHN) (+31%; +1.5%), the world’s largest global cement, aggregates, and ready-mix concrete producer, was also a top contributor. During the quarter, CEO Eric Olsen and his management team made progress with respect to divestitures, merger synergies, and pricing. The company sold assets in India, Sri Lanka, and Vietnam at attractive prices. These sales coupled with previously announced transactions in South Korea, Saudi Arabia, and China got the company to its 2016 CHF3.5 billion divestiture goal ahead of schedule and helped LafargeHolcim reduce its debt from CHF18 billion to CHF13 billion in 2016. An announced CHF1.5 billion of additional divestitures are targeted for 2017, which will move the balance sheet to investment grade quality and allow management to return free cash flow (FCF) to shareholders. Expected synergies from last year’s merger between Lafarge and Holcim have come through on target with an expected CHF450 million this year. Industry cement pricing is moving in the right direction. During the quarter, prices increased 2.2% sequentially versus 1.2% in 1Q 2016 and -1.6% in 4Q 2015. LafargeHolcim now has higher prices in almost 70% of its markets versus 2015 levels. Even though volumes did not grow in all markets, higher prices and large cost savings resulted in strong earnings before interest, taxes, depreciation, and amortization (EBITDA). Despite the stock’s rise, the company remains one of the more undervalued securities in the portfolio.


    Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on Chesapeake

    Chesapeake (NYSE:CHK) (+112%; +4.0%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the top contributor to performance during the quarter. Early in the year we swapped our equity position for near-term bonds and preferred stocks which offered equity-like returns and a shorter horizon for value recognition. As management delivered good results, the bonds approached par. Consequently, we sold all of the remaining bonds over the last three months. On the final day of the quarter, we exchanged all of our preferreds into equity at a price well below our appraisal. In the quarter, both operating expenses and capital expenditures continued to improve, additional debt was retired below face value, and management reduced distribution costs through restructuring agreements with Williams and selling the Barnett assets. The company is pursuing more cost improvements and increased its asset sale target for the year to $2 billion after surpassing the original $1 billion goal. Asset sales plus proceeds from the recent upsized term loan and convertible debt offering, which raised more capital at better terms than expected, should cover the company’s obligations for at least three years. We remain confident that CEO Doug Lawler and Chesapeake’s board will continue to successfully navigate the company through this lower-for-longer commodity price environment.


    Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on Level 3 Communications

    An example is Level 3 Communications (NYSE:LVLT), which is among the largest positions in the Partners, Small-Cap and Global Funds. This fiber network provider reinvests its excess cash into high margin growth rather than paying a dividend, has a beta of 1.5, and only trades at an adjusted 8x earnings before interest, taxes, depreciation, amortization (EBITDA) for expected FCF growth in the teens. By contrast, AT&T and Verizon have dividend yields over 4% with betas of 0.6 or less and trade at 7x EBITDA, with growth prospects limited to mid-single digits. Likewise, FedEx, another large holding in the Partners and Global Funds, shares a duopoly with UPS in the U.S. ground business, yet trades at a 13.9x price-to-earnings ratio (P/E), while UPS is at 18.0x. FedEx has lower labor costs and more growth potential as it takes share from UPS and integrates its recent purchase of TNT. FedEx has a dividend yield of less than 1% and a 1.2 beta, while UPS has a 2.9% dividend yield and a beta of 0.7.


    From Southeastern Asset Management's third quarter 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on Wynn Resorts

    This pursuit of yield has contributed to the opportunity to own select gaming companies across the Funds. In the U.S., Wynn Resorts (NASDAQ:WYNN), which we own in the Partners, Small-Cap and Global Funds, trades at 9.5x projected EBITDA and has a dividend yield of 2.1%. Its comparable peer, Las Vegas Sands, has a dividend yield of over 5% and trades at 15.0x EBITDA. Similarly, in Macau, Melco Crown, the operating business for the casinos we own in the International and Global Funds through Melco International, has a dividend yield of 0.5% and is dramatically cheaper at 9.2x EBITDA than its competitor, Sands China, which has a 5.9% dividend yield and trades at 15.6x EBITDA.

      


  • Longleaf Partners 3rd Quarter Fund Commentary

    Longleaf Partners Fund delivered a hefty 11.07% in the third quarter, taking the year-to-date (YTD) return to 18.32%. In spite of above normal cash levels, our results far surpassed the S&P 500 Index’s 3.85% return for the last three months and 7.84% for 2016. Over the last twelve months, the Fund has more than doubled our annual absolute goal of inflation plus 10% and outperformed the index.

      


  • Longleaf Partners Funds 3rd Quarter Shareholder Letter

    We are pleased to report strong absolute returns for all four Longleaf Partners Funds for the first nine months of 2016. All four Funds also surpassed their respective benchmarks by a wide margin for the year-to-date. In the third quarter, Fund benchmark indices rose, and the Funds were well above those benchmarks, with the exception of the Small-Cap Fund. Over the last twelve months, all four funds exceeded our annual absolute goal of inflation plus 10% as well as their relative benchmarks.


    Impact of the Low Interest Rate Environment

      


  • Mason Hawkins Cuts Chemtura

    Mason Hawkins (TradesPortfolio) sold out  of Chemtura Corp. (NYSE:CHMT). He sold his 4,286,930 shares at an average price of $32.81 per share. The trade had a -1.17% impact on Hawkins portfolio. Since the fourth quarter of 2014, Hawkins gained an estimated 38% with his investment in the company.


    It was reported that Hawkins had no remaining shares in Chemtura Corp on Sept. 30, according to a 13-G filing with the Securities and Exchange Commission.

      


  • Mason Hawkins Exits Dreamworks, Trims Chesapeake, Alphabet

    Mason Hawkins (Trades, Portfolio) has been chairman and CEO of Southeastern Asset Management since 1975. He and his partners manage the Longleaf Partners Funds. The guru’s largest second quarter sales are as follows:


    The guru closed his stake in Dreamworks Animation SKG Inc. (DWA) with an impact of -3.9% on the portfolio.

      


  • Southeastern Asset Management Comments on SoftBank

    SoftBank (TSE:9984) (+18%; 0.7%), the Tokyo based company that owns Japan’s third largest mobile network, significant stakes in Alibaba, Sprint, and Yahoo! Japan, plus a portfolio of internet investments, also contributed to results. The company announced plans to sell some of its Alibaba shares and exit its GungHo ownership as well as its stake in mobile game company Supercell, generating almost $20 billion to repurchase discounted SoftBank shares. CEO Masayoshi Son, the founder and largest individual shareholder of SoftBank, announced late in the quarter his intention to remain CEO for the next 10 years. This decision prompted Nikesh Arora, his intended successor, to resign on friendly terms. Son


    From Southeastern Asset Management's second quarter 2016 Global Fund Commentary.

      


  • Southeastern Asset Management Comments on DreamWorks

    As noted above, DreamWorks (NASDAQ:DWA) (+60%; +5.0%), the film studio and multimedia company, was the Fund’s largest holding and drove much of the return in the quarter, when Comcast announced an all cash acquisition for $41 per share. As our discipline dictates, we sold our stake when the price rose to our appraisal. DreamWorks was the kind of opportunity Southeastern hopes to find— a company with high quality, stable assets but volatile earnings being mispriced in a period when the market is rewarding companies with more predictable earnings and high dividend yields. We started buying DreamWorks in the third quarter of 2014 at $19 following disappointing new movie releases. Our appraisal hinged on the valuable film library and DreamWorks’ growing success in TV and web content as well as licensing. We partnered with a strong board and owner-operator CEO, who built the company’s brands, developed a presence in China, managed costs, and ultimately monetized the company at full value.


    From Southeastern Asset Management's Small-Cap Fund Commentary.

      


  • Southeastern Asset Management Comments on DreamWorks

    As noted above, DreamWorks (NASDAQ:DWA) (+60%; +5.0%), the film studio and multimedia company, was the Fund’s largest holding and drove much of the return in the quarter, when Comcast announced an all cash acquisition for $41 per share. As our discipline dictates, we sold our stake when the price rose to our appraisal. DreamWorks was the kind of opportunity Southeastern hopes to find— a company with high quality, stable assets but volatile earnings being mispriced in a period when the market is rewarding companies with more predictable earnings and high dividend yields. We started buying DreamWorks in the third quarter of 2014 at $19 following disappointing new movie releases. Our appraisal hinged on the valuable film library and DreamWorks’ growing success in TV and web content as well as licensing. We partnered with a strong board and owner-operator CEO, who built the company’s brands, developed a presence in China, managed costs, and ultimately monetized the company at full value.


    From Southeastern Asset Management's Small-Cap Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on Mineral Resources

    We also sold Mineral Resources (ASX:MIN), the Australian-based mining services company, on the strength of a surprisingly strong upward move in iron ore prices. Although the company’s iron ore crushing revenues are driven primarily by the volume of the ore crushed rather than the price of the commodity, the stock’s high correlation with iron ore price hurt our results over the time we owned the stock.


    From Southeastern Asset Management's International Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on BR Properties

    We sold BR Properties (BSP:BRP3), Brazil’s largest commercial office real estate landlord, following the stock’s rise after GP Investments raised its bid for the company. In spite of high quality properties and a solid partner in Claudio Bruni, the highly challenged Brazilian environment and concurrent currency depreciation resulted in a dollar loss over our full holding period.


    From Southeastern Asset Management's International Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on OCI

    OCI (XAMS:OCI) (-31%; -1.4%), a global fertilizer and chemical producer, also detracted from second quarter results. The two main pressures over the last three months were weakness in urea commodity prices (a key nitrogen fertilizer) and uncertainty around the CF Industries merger. Despite attractive strategic rationale for the combination of CF and OCI, the increased crackdown on tax inversions in the U.S. made the deal untenable. OCI’s European domicile further pressured the stock in the last week of the quarter, even though the Brexit vote should not impact fertilizer demand and could create some currency translation benefits to OCI. Globally, nitrogen fertilizer demand increased, helping to deplete excess supply. OCI’s plants have an advantage by being located near low-cost natural gas, a primary feedstock in fertilizer. Our investment case incorporates demand for nitrogen fertilizer continuing to grow at a couple of percent annually and supply tightening. Beyond 2016, no major additional plant capacity will be added for at least five years. Despite the current decline in nitrogen fertilizer prices, the company is generating significant free cash flow. CEO Nassef Sawiris and his team are working to grow value per share and are exhibiting a disciplined approach to monetizing assets at prices that reflect longer term intrinsic values.


    From Southeastern Asset Management's International Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on Melco International

    Ending the quarter as the Fund’s largest detractor was Melco International (HKSE:00200) (-33%; -2.7%), the Macau casino and hotel operator. Although the company’s $3.2 billion Studio City project (relative to Melco’s market cap of $9 billion) opened in late 2015 and is now generating positive cash flow, construction activity near the property has adversely affected customer traffic flow in the short term. As the construction ends later this year, we anticipate that Studio City’s location and non-gaming attractions will draw more highly profitable mass visitors. Shuttle service to Studio City from other Macau casinos began in June and should boost revenue. In May, Melco Crown Entertainement, the joint venture that owns Melco International’s Macau properties, purchased $800 million of its shares from James Packer at a steep discount, increasing Melco International’s ownership of Melco Crown to 38% and placing Melco International CEO Lawrence Ho firmly in control of the Macau properties. The stock market value of Melco International’s stake in Melco Crown is worth more than 150% of Melco International’s market cap. Ho again increased his personal stake in Melco International.


    From Southeastern Asset Management's International Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on Great Eagle

    Also a positive contributor for the quarter was Great Eagle (HKSE:00041) (20%; 1.0%), a Hong Kong real estate company that invests in and manages high quality office, retail, residential and hotel properties around the world. In addition to an over 60% stake in publicly listed Champion REIT, Great Eagle also owns hotels branded under the Langham name, the Eaton hotels in Hong Kong and Shanghai, and Chelsea Hotel in Toronto and trades at a significant discount to intrinsic value. With a strong net cash position, the company announced a 2 Hong Kong Dollar per share special dividend which, combined with the regular dividend, equated to an almost 10% dividend yield. In June, the company announced the sale of its 28 story office building in San Francisco at a 3% net operating income (NOI) cap rate. Our partners, the Lo family, own 60% of the company and bought more stock during the quarter.


    From Southeastern Asset Management's International Fund second quarter 2016 commentary.

      


  • Southeastern Asset Management Comments on adidas

    adidas (XTER:ADS) (+23%;+1.2%), the German-based global sportswear and equipment brand, remained the Fund’s largest contributor as the company reported stronger-than-expected results. Overall revenues rose 22%, operating profits gained 35%, and net income was up 38%. Earnings per share (EPS) grew 50%, helped by buyback activity during the quarter. The company increased its 2016 organic revenue growth outlook to 15% from the previous 10-12% range. During the quarter the company announced it was actively seeking a buyer for its golf segment, including the TaylorMade, Ashworth, and Adams brands. Additionally, two highly qualified investors, one of whom we proposed, joined the company’s board.


    From Southeastern Asset Management's second quarter 2016 commentary.

      


  • Mason Hawkins' Southeastern Management Largest Trades of the 2nd Quarter

    Mason Hawkins (Trades, Portfolio) and his partners are value investors. He has been Chairman and CEO of Southeastern Asset Management since 1975. These are the firm's recent trades during the second quarter, according to GuruFocus data.


    Southeastern bought 8,304,492 shares in Liberty Media Corp Class C (LMCK) with an impact of 1.5% on the portfolio.

      


  • Southeastern Asset Management's Longleaf Partners 2nd Quarter International Fund Commentary

    Longleaf Partners International Fund outperformed the MSCI EAFE Index in the first half of 2016, with a 0.00% return compared to the index’s loss of -4.42%. In the recent quarter, the Fund fell -2.76% while the index lost -1.46%.

      


  • Southeastern Asset Management Comments on CK Hutchison

    CK Hutchison (HKSE:00001) (-14%; -1.2%), a global conglomerate comprised of five core businesses (retail, telecommunications, infrastructure, ports, and energy), was the primary performance detractor for the quarter. Referenced earlier, CK Hutchison’s plan for its Three mobile phone network to acquire U.K. telecom company O2 was denied by the European regulator. While CK Hutchison is Hong Kong-based, the stock also fell with the Brexit vote because of fears of the impact on its European and U.K. operations which generated over half of its pre-tax earnings last year. However, Chairman Li Ka-shing and his son, Victor, have demonstrated a compelling long-term record of building businesses, compounding net asset value at double-digit rates, and buying and selling assets at attractive prices, and their history includes intelligent capital allocation during previous market dislocations. We are confident our management partners will continue to grow and unlock value.


    From Longleaf Partners' second quarter 2016 fund commentary.

      


  • Southeastern Asset Management Comments on CONSOL

    Also a top contributor, CONSOL (NYSE:CNX) (+43%; +1.7%), the natural gas and Appalachian coal company, continued its positive momentum from the first quarter which saw the addition of new directors, the elevation of Will Thorndike to Chairman, and the sale of the metallurgical coal assets at a price accretive to our value. In 2Q, CONSOL reduced its coal and gas operating costs greater than expected, delivered free cash flow and guided for positive free cash flow, the remainder of the year. The company also had its borrowing base reaffirmed at $2 billion. Recent transactions confirmed the value of CONSOL’s high quality natural gas reserves and acreage. Our capablemanagement partners continue to focus the company on its core natural gas assets while pursuing the monetization of non-core assets, with the goal of separating its coal company from its exploration and production business.


    From Longleaf Partners' second quarter 2016 fund commentary.

      


  • Southeastern Asset Management Comments on Chesapeake

    As stated earlier, Chesapeake (NYSE:CHK) (+73%;+3.6%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the Fund’s largest contributor during the quarter. Earlier in the year, we swapped our equity for preferred stock and also added to our Chesapeake position via very discounted bonds and convertible bonds. This repositioning paid off in the quarter; the bonds appreciated more quickly than the stock as the company continued to lower its overall debt through purchases below par and debt for equity swaps. Additionally, in April, Chesapeake had its $4 billion revolving credit facility reaffirmed (90%+ untapped), with the next scheduled redetermination pushed out until June 2017. The company increased liquidity with the sale of about half of its mid-continent STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher Counties) acreage to Newfield at a fair price of over $400 million. In total, net debt has declined by over 10% or $1 billion in 2016. Management projects additional asset sales this year and continues to renegotiate pipeline commitments toward better rates. The company has put on hedges that help mitigate its downside. We remain confident that CEO Doug Lawler and Chesapeake’s board will successfully navigate the company through this particularly challenging commodity price environment.


    From Longleaf Partners' second quarter 2016 fund commentary.

      


  • Longleaf Partners 2nd Quarter Fund Commentary

    Longleaf Partners Fund meaningfully outperformed the S&P 500 Index in the first half of 2016, rising 6.53% versus the index’s gain of 3.84%. In the second quarter, the Fund returned 2.10% versus 2.46% for the index. Our energy investments were again the largest contributors following similar strength in the first quarter. Both Chesapeake Energy and CONSOL Energy benefitted from managements monetizing assets and succeeding in reaffirming credit lines, as well as from improving commodity prices. CK Hutchison detracted most from performance in the quarter; European regulators denied approval of the company’s acquisition of U.K. mobile company O2, and weeks later, the Brexit vote weighed on CK Hutchison’s stock given its large footprint in European retail, ports, infrastructure, and telecom. Since the S&P is comprised of U.S. stocks which held up better than European shares following Brexit, the Fund’s three European-domiciled businesses weighed on relative returns, due in part to the dollar’s quick rise. However, the Fund’s relative performance benefitted from our limited investment in information technology, which was the index’s biggest detractor as its largest and worst performing sector.

      


  • Mason Hawkins Slashes Stake in DreamWorks Animation

    Mason Hawkins (Trades, Portfolio) slashed his stake in DreamWorks Animation (NASDAQ:DWA) by 89.20% on April 30.


    DreamWorks Animation was originally founded in 1994 by Jeffrey Katzenberg, Steven Spielberg and David Geffen. Over the past 22 years DreamWorks Animation has created a few world-renowned movies such as "Shrek," "Kung Fu Panda" and "Madagascar." DreamWorks Animation creates and innovates 3D animated feature films, original TV series, interactive media, live entertainment, themed experiences, consumer products, publishing and trailblazing technology.

      


  • Mason Hawkins Sells More Than 93% of Aon Holdings

    Mason Hawkins (Trades, Portfolio) of Southeastern Asset Management made his biggest transaction of the first quarter not with an acquisition but with the near divestiture of a stake.

    Hawkins’ top transaction in the first quarter was the sale of more than 93% of his stake in Aon PLC (NYSE:AON), a London-based professional services company. Hawkins sold 6,772,289 shares for an average price of $93.56 per share. The deal had a -5.65% impact on Hawkins’ portfolio.  


  • Longleaf Partners Small-Cap Fund 1st Quarter Commentary

    First quarter commentary:


    Longleaf Partners Small-Cap Fund advanced a robust 4.60% in the first quarter, far exceeding the Russell 2000 Index’s -1.52% decline. For the one-year and longer periods, the Fund’s performance also surpassed the index. A number of our stocks had double-digit gains, including several of our most undervalued businesses coming out of 2015. Most of our companies generated solid operating results, and management activity helped drive higher appraisals. Not only were our absolute returns well beyond our goal of inflation plus 10%, but our relative results also benefitted from our lack of exposure to health care, which was among the top performing index sectors in 2015 but was the Russell 2000’s worst performing sector in the quarter.

      


  • Longleaf Partners Comments on Rolls-Royce

    We exited our small position in British power systems company Rolls-Royce (LSE:RR.) after its price rallied in the first half of the quarter. The business has long-term upside, but the thesis will take longer to play out than we originally expected. We invested our proceeds in higher return opportunities.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Comments on ALS Limited

    We sold Australian-based testing, inspection, and certification company ALS Limited (ASX:ALQ) at a loss after owning it for just over a year. The company announced a rights issue, which we thought was unnecessary, at a steep discount to market price. This decreased both our appraisal and confidence in management’s capital allocation skill.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Comments on CF Industries

    We sold three companies in the quarter and initiated a small position in nitrogen fertilizer manufacturer and distributor CF Industries (NYSE:CF), which offered a more discounted way to increase our stake in OCI post deal. CF CEO Tony Will is buying back discounted shares, and OCI CEO Nassef Sawiris will be the largest CF shareholder and join the board when the deal closes.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Comments on EXOR

    EXOR (MIL:EXO) (-21%; -2.3%), the Italian holding company, detracted from the Fund’s results as its share price closely correlated with underlying holding Fiat Chrysler Auto (FCA) despite FCA comprising less than half of our total EXOR appraisal. Most auto stocks declined with concerns about peak demand, easy credit, and the longer term implications of driverless cars. Additionally, the Volkswagen emission test scandal weighed on European car makers. These current industry challenges are likely to delay CEO Sergio Marchionne’s pursuit of a merger for FCA. Additionally, the broader Italian market had the worst performance in Europe, which impacted EXOR’s share price despite the value overwhelmingly coming from outside of Italy. EXOR completed its acquisition of Bermuda reinsurer PartnerRe in the quarter, providing another outlet for Chairman and CEO John Elkann to build value. We believe there are ample strategic and value building levers still to be pulled at EXOR and see the current price weakness as unjustified.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Comments on Mineral Resources

    Mineral Resources (ASX:MIN) (+61%; +1.2%), the Australian-based mining services company, surprised the investment community with stable operating results in its crushing business and lower mining costs. Additionally, higher iron ore prices and a stronger Australian dollar were favorable for the stock. Although ore prices did not benefit Mineral Resources’ crushing and processing business since the company is paid a fixed fee per ton, they did help the mining operation produce higher earnings before interest, taxes, depreciation and amortization (EBITDA) per ton. Management indicated the company is unlikely to move forward with the ambitious elevated transport system without a more attractive long-term iron ore pricing environment. The company began to buy back shares, and founder and managing director, Chris Ellison, purchased more shares personally. We trimmed our position.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Comments on Genting Berhad

    Genting Berhad (XKLS:3182) (+97%; +1.3%), the Malaysian holding company with gaming, property, plantation, pharmaceutical, and oil and gas assets, benefited from progress at several businesses and a rebound of the Malaysian ringgit. There was news of a potential initial public offering of Alzheimer’s drug maker TauRx Pharmaceuticals, which is 20.7% owned by Genting. The Singapore casino business steadied, with the core mass gaming and non-gaming business revenues expected to grow. The duopoly position in the stable Singapore jurisdiction represents a significant competitive advantage. Genting Singapore also began construction on its Jeju project in Korea, which offers potential upside for our appraisal and the stock. Despite the strong quarter, Genting trades at a significant discount to the sum of its parts, but we did trim our stake to reduce the overweight.


    From Longleaf Partners' International Fund first quarter 2016 letter.

      


  • Longleaf Partners Q1 2016 International Fund Commentary

    Longleaf Partners International Fund advanced a notable 2.83% in the first quarter, far surpassing the MSCI EAFE Index’s -3.01% decline. A number of our stocks had double-digit gains, including several of our most undervalued businesses coming out of 2015. Most of our companies generated solid operating results, and management activity helped drive higher appraisals. Not only were our absolute returns in line with our absolute goal of inflation plus 10%, but our relative results also benefitted from our lack of exposure to health care, which was among the top performing index sectors in 2015 but was among the MSCI EAFE’s worst performing sectors in the quarter.

      


  • Southeastern Asset Management Comments on OCI

    OCI (XAMS:OCI) (-21%; -0.9%), a global fertilizer and chemical producer, was the primary detractor from the Fund’s strong return. The stock fell early in the quarter, in line with a decline in the underlying urea commodity price which recovered somewhat by quarter-end. Global excess supply should diminish as nitrogen fertilizer demand grows approximately 2% per year while no additional plant capacity is scheduled for at least five years out. Uncertainty around OCI’s planned sale of its U.S. and European assets to CF Industries also weighed on the stock. A major hurdle to the deal was removed in mid-March, when OCI announced that Consolidated Energy Limited would jointly invest in the methanol plant, Natgasoline, which would fall outside of the scope of the assets going to CF. OCI is trading at a steep discount to our appraisal and even more cheaply assuming the CF deal closes in the second quarter of 2016 as planned.


    From Southeastern Asset Management's Q1 letter for Longleaf Partners Small-Cap Fund.

      


  • Southeastern Asset Management Comments on Scripps Networks

    Scripps Networks (NASDAQ:SNI) (+19%; +1.0%), the media company that owns cable channels, including HGTV, The Food Network, DIY Network, Cooking Channel, Travel Channel, and Great American Country, reported a strong quarter with all six networks adding new viewers as millennial growth continued. Advertising revenue grew at a mid-single digit rate. The company’s advertising is better than most competitors, with more exposure to stable categories than others have. Affiliate fee revenue growth is expected to grow at a mid-to-high-single digit rate, and programming cost growth should continue to decelerate. Part of the stock’s discount is related to its international expansion opportunity which has not produced profits yet but has created startup costs and noncash amortization. The company simplified its asset mix, purchasing the remaining 35% of The Travel Channel that it did not own and selling its 7.25% stake in Fox Sports South & Southeast.


    From Southeastern Asset Management's Q1 letter for Longleaf Partners Small-Cap Fund.

      


  • Southeastern Asset Management Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) (+43%; +1.1%), the Appalachian natural gas and coal company that was our top detractor in 2015, added meaningfully to first quarter results. Management adjusted to lower commodity prices by adopting significant cost controls and expects positive free cash flow (FCF) in 2016. Early in the quarter, CONSOL announced it was lowering capex by more than 50% from previous guidance. The company also reduced operating expenses, effectively decreasing its Debt/OCF ratio from 3.8 to 3.6. As we continued our constructive dialogue with management regarding asset monetization, CONSOL announced the addition of three new board members, two of whom we suggested. Additionally, Will Thorndike, whom we previously recommended as a board member, replaced Brett Harvey as Chairman. Shortly thereafter, CONSOL sold its Buchanan mine and other met coal assets for $420 million to a private equity-backed firm. The sale was accretive to the value of CONSOL, and management is pursuing additional asset sales.


    From Southeastern Asset Management's Q1 letter for Longleaf Partners Small-Cap Fund.

      


  • Southeastern Asset Management Comments on ViaSat

    ViaSat (NASDAQ:VSAT) (+20%; +1.1%), an integrated satellite company, reported a substantial 7% increase in average revenue per user (ARPU) year-over-year. Customer churn declined with the company’s focus on higher value, stable subscribers. Additionally, news reports that American Airlines would reexamine its in-flight Wi-Fi contract with ViaSat’s competitor, Gogo, implied that ViaSat could win the new contract given its superior service quality. CEO Mark Dankberg is a large owner who has invested wisely in expanding ViaSat’s capacity and product lines. The company plans to launch a revolutionary new satellite broadband constellation (ViaSat-3) in 2019 that has the potential to further ViaSat’s lead in the industry. Although ViaSat-3 is not fully reflected in our appraisal, it offers significant longer-term upside to our value and the share price.


    From Southeastern Asset Management's Q1 letter for Longleaf Partners Small-Cap Fund.

      


  • Southeastern Asset Management Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+36%; +2.0%), the luxury gaming and hotel operator with prime real estate in Las Vegas, Macau, and Boston, was the largest contributor in the quarter. Wynn preannounced positive results to enable management to buy more stock. CEO Steve Wynn demonstrated his confidence in the business by purchasing nearly one million shares, bringing his total stake in the company to 12%. Wynn Las Vegas reported better-than-expected 4Q results. Although pressure continued in Macau’s lower margin VIP segment, mass gaming revenues in Macau stabilized, and year-over-year gross gaming revenue comps in February were the strongest in almost two years. Wynn remains well below our appraisal and offers a compelling long-term opportunity for significant growth with a proven owner-operator at the helm. The value of properties in the development pipeline is not yet reflected in the stock price. The opening of Wynn Palace in Macau later in 2016 could spark additional stock appreciation as capital expenditures (capex) ends and revenues begin.


    From Southeastern Asset Management's Q1 letter for Longleaf Partners Small-Cap Fund.

      


  • Southeastern Asset Management's Q1 Letter for Longleaf Partners Small-Cap Fund

    Longleaf Partners Small-Cap Fund advanced a robust 4.60% in the first quarter, far exceeding the Russell 2000 Index’s -1.52% decline. For the one-year and longer periods, the Fund’s performance also surpassed the index. A number of our stocks had double-digit gains, including several of our most undervalued businesses coming out of 2015. Most of our companies generated solid operating results, and management activity helped drive higher appraisals. Not only were our absolute returns well beyond our goal of inflation plus 10%, but our relative results also benefitted from our lack of exposure to health care, which was among the top performing index sectors in 2015 but was the Russell 2000’s worst performing sector in the quarter.


    Stock prices in the first quarter embodied Ben Graham’s description of “Mr. Market,” whose manic short-term swings are driven by investor emotions. The market fell -15.9% at its February 11 low point but then rallied over 17% by the end of March, a 3300 basis point swing. While economic and political uncertainties fostered the volatility, our appraisals proved much more stable, highlighting the importance of anchoring investment decisions to the long-term cash flows and underlying asset values of each company.

      


  • Southeastern Asset Management Comments on McDonald’s

    As discussed in our year-end report, we sold our small remaining position in global quick service restaurant operator McDonald’s (NYSE:MCD) as 2016 began. During the year plus that we owned the stock, it gained almost 30% and was among the strongest contributors to performance. We appreciate the board’s and management’s solid execution.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on National Oilwell Varco

    We sold National Oilwell Varco (NYSE:NOV), a global provider of equipment and components used in offshore and land drilling, negatively impacted performance before we sold it in March. When we initiated the position in the third quarter of 2015, we believed that NOV’s higher margin rig aftermarket business would grow, even as new oil rig purchases were canceled or delayed in the lower oil price environment. Our thesis did not hold up as rig operators cannibalized used parts from idled rigs, pressuring prices and ultimately lowering NOV’s aftermarket margins. We exited at a loss when the stock price partially recovered after oil moved from below $30 toward $40.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on Aon

    We exited three holdings during the quarter, including our successful long-term investment in Aon (NYSE:AON). We first purchased the stock in the second half of 2002, when the low point fell to near $14 per share. We bought again in 2009 and 2010 between the mid $30s and low $40s. Over time, the company went from being the second largest insurance broker in the world to the largest and also built its benefits and consulting business into a leading global competitor. Under the leadership of Greg Case, Aon grew revenues, expanded margins, reduced corporate taxes, and repurchased substantial shares at discounted prices. Value per share grew, and ultimately we exited in March at more than $100 per share. We are grateful for Greg’s superior stewardship, and we hope to have an opportunity to partner with him in the future.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on CK Hutchison

    CK Hutchison (HKSE:00001) (-4%; -0.6%), a Hong Kong-based global conglomerate comprised of four primary businesses (retail, telecommunications, infrastructure and ports), is our second largest position and was the main performance detractor in the quarter. China economic fears and weakness in the Hong Kong dollar (HKD) weighed on the stock. Conversely, the businesses’ values remained stable with less than 15% of its economic exposure in China and Hong Kong. Chairman Li Ka-shing and his son, Victor Li, have demonstrated a compelling track record of building companies, compounding net asset value at double-digit rates, and buying and selling assets at attractive prices. Last year, CK Hutchison announced plans for its Three U.K. telecom business to acquire U.K. telecom company O2. Although still pending regulatory approval, the deal would allow the company to recognize significant synergies, estimated at £3 billion


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) (+43%; +1.3%), the Appalachian coal and natural gas company that was among top detractors in 2015, added meaningfully to first quarter results. Management adjusted to lower commodity prices by adopting significant cost controls and expects positive free cash flow (FCF) in 2016. Early in the quarter, CONSOL announced it was lowering capex by more than 50% from previous guidance. The company also reduced operating expenses, effectively decreasing its Debt/ Operating Cash Flow ratio from 3.8 to 3.6. As we continued our constructive dialogue with management regarding asset monetization, CONSOL announced the addition of three new board members, two of whom we suggested. Additionally, Will Thorndike, whom we previously recommended as a board member, replaced Brett Harvey as Chairman. Shortly thereafter, CONSOL sold its Buchanan mine and other met coal assets for $420 million to a private equity-backed firm. The sale was accretive to the value of CONSOL, and management is pursuing additional asset sales.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on Scripps Networks

    Scripps Networks (NASDAQ:SNI) (+19%; +1.4%), the media company that owns cable channels, including HGTV, The Food Network, DIY Network, Cooking Channel, Travel Channel, and Great American Country, reported a strong quarter with all six networks adding new viewers as millennial growth continued. Advertising revenue grew at a mid-single digit rate. The company’s advertising is better than most competitors, with more exposure to stable categories than others have. Affiliate fee revenue growth is expected to grow at a mid-to-high-single digit rate, and programming cost growth should continue to decelerate. Part of the stock’s discount is related to its international expansion opportunity which has not produced profits yet but has created startup costs and noncash amortization. The company purchased the remaining 35% of The Travel Channel that it did not own and sold its 7.25% stake in Fox Sports South & Southeast.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+36%; +2.7%), the luxury gaming and hotel operator with prime real estate in Las Vegas, Macau, and Boston, was the largest contributor in the quarter. Wynn preannounced positive results to enable management to buy more stock. CEO Steve Wynn demonstrated his confidence in the business by purchasing nearly one million shares, bringing his total stake in the company to 12%. Wynn Las Vegas reported better-than-expected 4Q results. Although pressure continued in Macau’s lower margin VIP segment, mass gaming revenues in Macau stabilized, and year-over-year gross gaming revenue comps in February were the strongest in almost two years. Wynn remains well below our appraisal and offers a compelling long-term opportunity for significant growth with a proven owner-operator at the helm. The value of properties in the development pipeline is not yet reflected in the stock price. The opening of Wynn Palace in Macau later in 2016 could spark additional stock appreciation as capital expenditures (capex) ends and revenues begin.


    From Southeastern Asset Management's Q1 2016 shareholder letter.

      


  • Southeastern Asset Management's Longleaf Partners Fund 1st Quarter Letter

    Longleaf Partners Fund posted a formidable 4.34% return in the first quarter, exceeding the S&P 500 Index’s 1.35%. A number of our stocks had double-digit gains, including several of our most undervalued businesses coming out of 2015. Most of our companies generated solid operating results, and management activity helped drive higher appraisals. Our two biggest positions declined slightly, and their portfolio weights made them among the notable detractors to our strong gains. Our investment cases and our high conviction for these companies remain unchanged. Not only were our absolute returns well beyond our goal of inflation plus 10%, but our relative results also benefitted from our lack of exposure to health care, which was among the top performing index sectors in 2015 but was the S&P 500’s worst performing sector in the quarter.


    Stock prices in the first quarter embodied Ben Graham’s description of “Mr. Market,” whose manic short-term swings are driven by investor emotions. The market fell -10.3% at its February 11 low point but then rallied over 13% by the end of March, a 2300 basis point swing. While economic and political uncertainties fostered the volatility, our appraisals proved much more stable, highlighting the importance of anchoring investment decisions to the long-term cash flows and underlying asset values of each company.

      


  • The Art of Piggybacking

    Piggybacking has been a topic that has been discussed frequently these days. Fellow writer the Science of Hitting’s recent article is quite illuminating and definitely worth reading. Inspired by him, I wrote this article to share my observations and thoughts on this subject.


    When I first started investing, I piggybacked many gurus and very frequently. I remember the days when I saw David Einhorn (Trades, Portfolio) or Mason Hawkins (Trades, Portfolio) initiating a position in a stock, and within a few hours I became an owner that the same stock. When I saw Exco (NYSE:XCO) was bought by Prem Watsa (Trades, Portfolio), Howard Marks (Trades, Portfolio) and Wilbur Ross (Trades, Portfolio), I put a good amount of money in it without even finishing up reading the 10-K.

      


  • Mason Hawkins Boosts Stake in Consol Energy

    Guru Mason Hawkins (Trades, Portfolio) boosted his stake in Consol Energy Inc. (NYSE:CNX) by nearly 15% with the purchase of 6,827,800 shares on Jan. 4.


    Hawkins now owns 52,835,737 shares of Consol Energy. It is the largest holding in his portfolio.

      


  • Mason Hawkins Trims Position in Everest Re Group

    Guru Mason Hawkins (Trades, Portfolio) has over 40 years of experience in the investment industry. Hawkins has similar investment philosophies to Benjamin Graham and Philip Fisher. Hawkins looks for businesses with good management, good people and companies that sell for deep discounts significantly less than their intrinsic value that provide a margin of safety.


    Hawkins founded Southeastern Asset Management in 1975 and is the chairman and CEO for the company. Prior to founding Southeastern Asset Management, Hawkins graduated from the University of Florida in 1970 and later went on to attend the University of Georgia where he received his MBA in finance.

      


  • Mason Hawkins Sells 3 Stakes in Portfolio

    Mason Hawkins (Trades, Portfolio), chairman and CEO of Southeastern Asset Management since 1975, made his largest fourth-quarter transactions in the form of divestitures. The guru sold three existing stakes in his portfolio in the quarter.


    Hawkins sold his 19,933,835-share stake in Loews Corp. (NYSE:L), a New York-based conglomerate involved in insurance, hotels, oil drilling and pipeline transport, for an average price of $37.29 per share. The deal had a -6.08% impact on Hawkins’ portfolio.

      


  • Longleaf Partners Comments on Mineral Resources

    Mineral Resources (ASX:MIN) returned -51% during 2015 driven largely by the collapse of iron ore prices. The crushing services business maintained steady volumes and strong margins but was not enough to appease market concerns of continued iron ore price declines. The company surprised the market with its ability to reduce costs in the iron ore mining business at a pace that maintained positive cash flow margins. During the fourth quarter, the company announced a A$30million stock buyback, (4% of outstanding shares), higher EBITDA guidance, and a new EPC (engineering, procurement, and construction) contract for a crushing plant for Rio Tinto’s Nammuldi mine. The company continued to take costs out of its mining operations to ensure that every ton of iron ore produced is sold at positive cash flow margins.

      


  • Longleaf Partners Comments on Genting Berhad

    Genting Berhad (XKLX:3182) was one of the largest detractors for the year, declining 53%. Malaysia macro/FX was a big headwind, and the company’s development of its sizable oil and gas assets is likely to be delayed given the weakness in energy prices. The company’s Singapore duopoly casino, publicly listed Genting Singapore, is led by CEO Hee Teck Tan and was down after reporting four quarters of unusually poor hold (2.0%–2.5%) in its gaming business, as well as some equity investment write-downs. Since opening the casino, the cumulative win rate at Genting Singapore has been close to the theoretical average of 2.85%, and we believe win rates should normalize over time. In the quarter we added Genting Singapore in addition to our Genting Berhad position. The stock’s deep discount was largely due to a slowdown in Chinese VIP visitors as a result of the Chinese anti-corruption campaign. Genting’s core mass market business has been steady and more than justifies our appraisal. The duopoly position in the stable Singapore jurisdiction represents a significant sustainable competitive advantage. The simple P/E multiple misses the sizable cash and investment portfolio on the balance sheet and minimal maintenance capex requirement (capex is much lower than depreciation). The company engaged in a value-accretive share buyback in recent months.

      


  • Longleaf Partners Comments on LafargeHolcim

    Global cement, aggregates, and ready-mix concrete producer LafargeHolcim (XSWX:LHN) declined 2% in the quarter and over the year. During the quarter, CEO Eric Olsen presented his three year operating plan with an intense focus on free cash flow generation, internal growth, and returning cash to shareholders. The plan should enable debt to return to investment grade and a dividend payout ratio near 50%. With only modest volume and pricing assumptions, combined with realizing synergies from the LafargeHolcim merger, we believe the plan is achievable. We are excited to own a company with a collection of geographically advantaged assets at less than approximately 8x normalized FCF earnings power and strong cash generation that should be allocated to maximize value per share.

      


  • Longleaf Partners Comments on CEMEX

    Our position in the convertible bonds of CEMEX (NYSE:CX) declined 12% in the quarter and 21% since we bought the position in the third quarter. The price declined due to weak Latin American currencies, challenged trends in some emerging markets, and a general sell-off across the entire non-investment grade bond sector. We believe CEMEX’s assets are worth roughly twice the debt, which provides generous asset coverage. In addition, we receive a yield component and the opportunity of longer-term upside over par value through the convertible feature as EBITDA growth and debt reduction drive the underlying equity value higher.

      


  • Longleaf Partners Comments on EXOR

    Also contributing to performance, Italian holding company EXOR (OTCPK:EXORF) appreciated 5% in the quarter, taking full year returns to 12%. Over the course of the year, Chairman and CEO John Elkann, together with Fiat Chrysler Auto (FCA) CEO Sergio Marchionne, took numerous steps to drive value growth. The company sold or spun assets at a strong price, including an $893 million initial public offering (IPO) of Ferrari—well above expected value, the sale of Cushman and Wakefield to DTX for $2 billion—a more than 30% premium to our carrying value for the business, and the recently announced sale of its 17% stake in Banijay for €60.1 million—a €25 million premium to book value. Management reinvested proceeds into high quality assets at a fair price. In the second half, EXOR announced the acquisition of Bermuda reinsurer PartnerRe to be completed in the first quarter of 2016 and increased its long-held stake in The Economist. At FCA, Sergio Marchionne publicly called for auto industry consolidation, potentially positioning EXOR for discussions to merge FCA with another key player.

      


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