Mason Hawkins

Mason Hawkins

Last Update: 2014-12-10

Number of Stocks: 30
Number of New Stocks: 5

Total Value: $18,328 Mil
Q/Q Turnover: 12%

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

Mason Hawkins Watch

  • Longleaf Partners Fund Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (LVLT) announced a deal to acquire tw telecom and returned 12% in the quarter and 32% for the first half. With the deal, Level 3 gets increased tax benefits for its historic NOLs (net operating losses) due to the company’s increased equity capitalization. The transaction also affords an identified $200 million in synergies, roughly half of which come from the straightforward traffic switch onto Level 3’s backbone. The deal is expected to close in the fourth quarter. Beyond the merger, in his first year as CEO, Jeff Storey and his team have delivered solid revenue growth, margin improvements, and higher cash flow guidance.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Semi Annual 2014 Management Discussion.  


  • Longleaf Partners Fund Comments on CONSOL Energy

    CONSOL Energy (CNX) returned 15% in the quarter and 21% YTD. The company announced better-than-expected earnings due to lower coal costs and stronger gas pricing and guided gas production growth of 30% over the next two years. Management is focusing on building value per share through monetizing non-core assets and moving forward with a MLP of the midstream gas assets in the second half of 2014.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Semi Annual 2014 Management Discussion.  


  • Longleaf Partners Fund Comments on Cheung Kong Holdings Ltd

    Cheung Kong (HKSE:00001), the Hong Kong based conglomerate with businesses around the world, returned 15% in the second quarter, pushing the YTD return to 21%. Over the first half of 2014, management made value-enhancing asset sales across multiple business lines. In the first quarter, Cheung Kong Infrastructure spun off and listed Hong Kong Electric. Additionally, 50% owned affiliate Hutchison Whampoa sold 25% of A.S. Watson Group, the world’s largest health and beauty retailer. In the second quarter, the company paid a HK$7 special dividend with the proceeds of the Watson sale. Sales of residential property in Hong Kong accelerated after some relaxation in stamp duty regulations. With high land valuations, our partners at Cheung Kong exercised the discipline we have come to expect - not acquiring a single piece of land in Hong Kong or China for over a year.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Semi Annual 2014 Management Discussion.  


  • Longleaf Partners Fund Comments on Chesapeake

    The biggest performance drivers in the quarter were among the companies that contributed most to YTD gains. Chesapeake (CHK), the U.S. oil and gas exploration and production company, rose 22% in the quarter and was up 15% YTD. During the quarter, the company announced better-than-expected production and realizations and raised yearly guidance on both of these metrics. Management continued to execute on the capital efficiency strategy, highlighted by the spin-off at quarter-end of its oilfield services business into a publicly traded company called Seventy Seven Energy. The spin-off eliminated approximately $1.5 billion of net debt from Chesapeake’s balance sheet. Divestitures of noncore acreage in Oklahoma, Texas, and Pennsylvania were also completed. Our CEO partner, Doug Lawler, is positioning the company to focus on its strong assets in the Eagle Ford, Marcellus and Utica plays, while growing production profitably and keeping capital expenditures within cash flow.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Semi Annual 2014 Management Discussion.  


  • Longleaf Partners Fund Semi Annual 2014 Management Discussion

    Longleaf Partners Fund returned 6.8% in the second quarter, outpacing the S&P 500’s return of 5.2%. The Fund slightly trailed the Index year-to-date (YTD), with the performance of each rounding to 7.1%. The Partners Fund remained ahead of the Index as well as our absolute return goal of inflation plus 10% in the trailing year, despite our elevated cash position.


      


  • Longleaf Partners Funds 2014 Semi Annual Shareholder Letter

    Limited New Qualifiers


    In concert with the geographic performance differences over the quarter, investment opportunities also diverged by region. Ongoing pessimism about slower economic growth in China continued to weigh on stocks tied to Chinese demand, including those linked to natural resources. By contrast, European markets benefitted from the combination of low European Union interest rates spurring private equity activity and U.S. companies re-domiciling through offshore acquisitions to secure lower tax rates (“inversion”). The U.S. reflected a more extreme version of Europe with few discounted opportunities. Multiple factors contributed to the lack of qualifying U.S. investments – a five-year bull market, the lowest volatility since 2007, heightened activism, and the substitution of investor complacency for healthy fear. The largest driver of what we see as market overvaluation has been the rise in merger and acquisition activity encouraged by the Federal Reserve’s (Fed) commitment to historically low interest rates combined with the strength of corporate balance sheets, plus the aforementioned inversion driven by the world’s highest corporate tax rate.

      


  • Southeastern Asset Management Increases Stake in TW Telecom by 40 Percent

    Southeastern Asset Management, where Mason Hawkins (Trades, Portfolio) is chairman of the board and CEO, enlarged its position in TW Telecom Inc. (TWTC) for the first time after selling it down quarterly since the second quarter of 2011, according to GuruFocus Real Time Picks. The firm holds 15,201,344 shares after making the 40.3% increase on July 10.  


  • Longleaf Partners Comments on DirecTV

    During the quarter we exited DIRECTV (DTV), a highly successful core holding in our U.S. and Global accounts for over a decade. We discuss our DTV experience not to showcase one winner, but because the investment illustrates the process and approach we follow for holdings across all mandates and highlights some of Southeastern's unique research strengths.


    History of DTV Investment (based on Longleaf Partners Fund) Sometimes we can own a company in indirect ways that create part of the discount to intrinsic worth. In the case of DTV, we owned the underlying business via three different stocks over our thirteen-year holding period as shown on the chart that follows. Initially, in 2001 we bought GMH, the tracking stock that General Motors created for the Hughes division that included all of its satellite businesses. By early 2004, the company had been spun fully out of GM and renamed DIRECTV Group. Over the following four years, we opportunistically added to and trimmed our position.

      


  • Longleaf Partners Q1 2014 Shareholder Letter



  • Mason Hawkins Comments on Level 3 Communications

    Level 3 Communications (LVLT) was a key contributor in the fourth quarter, adding 24% and boosting 2013 gains to 44%. The company reported strong results following the appointment of Jeff Storey as CEO in April. Revenue growth and significant cost reductions improved margins. The company also refinanced $2.6 billion in debt. Large internet-based companies looking to control their customer connections highlighted the value of Level 3's dark fiber, which is not reflected in revenues. As management continues to execute, value growth should be meaningful. Growing revenues will especially benefit Level 3 given its fixed-cost asset base, lower-than-average maintenance capital spending, and minimal tax liability.

    From Mason Hawkins (Trades, Portfolio)' 2013 Longleaf Partners Fund management discussion.  


  • Mason Hawkins Comments on Aon

    For Aon (AON), the world's largest insurance broker and a leading benefits manager, increasing cash flow and healthy share repurchases helped our position gain 53% for the year. As noted in our third quarter commentary, higher interest rates should improve fiduciary income and help close thepensiongap.Aon'sprivatehealthcare exchange for corporate employees gained critical mass with the addition of Walgreens to the client base. CEO Greg Case and his management team have built value per share through their customer- focused, shareholder-oriented leadership.

    From Mason Hawkins (Trades, Portfolio)' 2013 Longleaf Partners Fund management discussion.  


  • Mason Hawkins Comments on Dell

    The shareholder approval of Dell (DELL)'s management buyout generated a positive return of 31% for 2013 in spite of the disappointing investment outcome. Philips gained 44% during the year. CEO Frans Van Houten and CFO Ron Wirahadiraksa completed a €2bn stock buyback at discounted prices, as well as delivered higher margins as planned. Philips' management team is pursuing additional cost reductions and believes the company has strong revenue and margin potential over the next two to three years in all three primary businesses: medical, lighting, and consumer lifestyle. They signaled their confidence in the future value growth of the business by announcing another €1.5bn share buyback.

    From Mason Hawkins (Trades, Portfolio)' 2013 Longleaf Partners Fund management discussion.  


  • Mason Hawkins Comments on FedEx

    FedEx (FDX) was a leading performer for the fourth quarter and the year, gaining 26% and 57%, respectively. Major cost initiatives gained traction as the company's Express unit grew margins by 1.4% in its most recent quarter. The Ground unit delivered strong growth with volume increases from e-commerce and higher pricing. FedEx repurchased 7.2 million shares, a 10% annualized pace. The stock's increase in the fourth quarter followed news that the company would begin a new 32 million share repurchase program. Management's operating success and capital allocation combined to build the company's worth through the year.

      


  • Mason Hawkins Comments on Chesapeake Energy

    Chesapeake Energy (CHK) was the largest contributor in 2013, up 59%. Together with new CEO Doug Lawler, the board that we helped seat in 2012 is instilling financial and operating discipline into the company. Over the last 19 months, the company reduced SG&A, sold a number of non- core assets, decreased capex, and committed to living within its cash flow in 2014. The company is focusing on its strong assets in the Eagle Ford, Marcellus, and Utica plays in order to grow production profitably. Even after the stock's gains, Chesapeake's oil and gas reserves sell for a discount to our appraisal. That appraisal would grow significantly in the long-term bull case for low cost natural gas replacing coal for power generation, fostering manufacturing renewal in the U.S., displacing some oil as a transportation fuel, and becoming a major export.

      


  • Longleaf Partners Fund Management Discussion for Fourth Quarter 2013

    Chesapeake Energy (CHK) was the largest contributor in 2013, up 59%. Together with new CEO Doug Lawler, the board that we helped seat in 2012 is instilling financial and operating discipline into the company. Over the last 19 months, the company reduced SG&A, sold a number of non- core assets, decreased capex, and committed to living within its cash flow in 2014. The company is focusing on its strong assets in the Eagle Ford, Marcellus, and Utica plays in order to grow production profitably. Even after the stock's gains, Chesapeake's oil and gas reserves sell for a discount to our appraisal. That appraisal would grow significantly in the long-term bull case for low cost natural gas replacing coal for power generation, fostering manufacturing renewal in the U.S., displacing some oil as a transportation fuel, and becoming a major export.


    FedEx (FDX) was a leading performer for the fourth quarter and the year, gaining 26% and 57%, respectively. Major cost initiatives gained traction as the company's Express unit grew margins by 1.4% in its most recent quarter. The Ground unit delivered strong growth with volume increases from e-commerce and higher pricing. FedEx repurchased 7.2 million shares, a 10% annualized pace. The stock's increase in the fourth quarter followed news that the company would begin a new 32 million share repurchase program. Management's operating success and capital allocation combined to build the company's worth through the year.

      


  • Mason Hawkins Raises Stake in 3 Stocks

    In 2013, Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Funds kept pace with the S&P 500’s buoyant return of over 32%. As disciplined investors, his team prefers to wait for more discounted stocks than investing in over-priced situations just for the sake of being invested. Hawkins wrote in his 2014 shareholder letter:

    “A broad market pullback could provide our next qualifiers. We are not market prognosticators, but few markets around the globe can claim undervaluation, and many have pockets of overvaluation. In the event of a correction, short-term performance is likely to decline. Our long-term results, however, will benefit from a lower P/V as we are armed with a vetted wish list of businesses and ample cash to be liquidity providers when new opportunities or existing names are offered at less than 60% of our appraisals. Additionally, lower prices will allow management teams at our current holdings to use their balance sheet strength to execute repurchases at deeper discounts that build values per share more rapidly.”  


  • Longleaf Partners Funds 2013 Annual Shareholder Letter

    Almost every investment positively contributed to performance in 2013, and the importance of good partners and strong businesses was evident. New leaders quickly improved operations and sold non-core assets to strengthen the balance sheets at Chesapeake, Hochtief , and Level 3. At Philips and Wendy's, managements focused on the most profitable parts of their businesses while implementing successful programs to increase revenues and margins. We had major asset sales at premiums to our appraisals at Vodafone (VOD) (Verizon Wireless stake) and Graham Holdings (GHC) (The Washington Post).


    Competitively advantaged holdings continued to demonstrate the value of moats at FedEx (FDX), Melco, and Texas Industries (TXI). These holdings were among our largest contributors to performance, and they exemplify activity prevalent across most of our holdings throughout the year.

      


  • Quality and High Conviction - Mason Hawkins in Review

    As of Sept. 30, 2013, the Longleaf Partners Fund, advised by Mason Hawkins’s Southeastern Asset Management, averaged an annual return of 24.13% over one year.

    In his third quarter 2013 letter to Longleaf shareholders, value investor Mason Hawkins offered a condensed summary on the quality of his selected companies: "The businesses we own should be able to deliver higher free cash flow over the next three years, thereby building intrinsic values. First, a number of our holdings that are headquartered in more developed markets such as Abbott, Cheung Kong, DirecTV, Lafarge, Mondelez, Philips, and Vodafone have large portions of their revenues in faster growing geographies. Second, the strength of our companies’ competitive positions and/or brands is enabling many to increase top line via pricing increases including Abbott, Cemex, DirecTV, Everest Re, FedEx, Ferrovial, Lafarge, Loews, Martin Marietta, Melco, Mondelez, News Corp, Scripps Networks, Texas Industries, Travelers, Washington Post, Vail, and Vulcan. Third, a number of our management teams are continuing to extract costs from their businesses to address slower growth and gain increased efficiencies. Material cost reductions are occurring at Abbott, Aon, Bank of New York Mellon, Cemex, Chesapeake, FedEx, Guinness Peat, Hochtief, Lafarge, Legg Mason, Level 3, Mondelez, Nitori, Philips, TNT Express, Washington Post, and Wendy’s. Fourth, in contrast to oft-stated concerns about peak margins, operating margins across our holdings are approximately one-third less than the overall market’s margins, with most of our companies operating closer to their 10-year average margins than their peaks."  


  • Mason Hawkins's Longleaf Partners Comments on DIRECTV

    The Fund had only three detractors in the quarter: Mosaic, Abbott Labs, and DIRECTV (DTV), with only Mosaic negatively impacting YTD results. We bought and exited Mosaic during the third quarter. Our case changed quickly with the potash industry drama that caused prices to drop. Abbott was down 4% in the quarter following FX headwinds, concerns over tougher rules for device approval in Europe, and issues at a dairy supplier leading to a meaningful product recall in the baby formula division in China. DIRECTV slipped 3% on increased subscriber churn amidst a challenged Brazilian economy. DIRECTV Latin America remains well positioned to benefit from rising pay-TV penetration in the region, and the mature U.S. business continues to generate higher ARPU (average revenue per user).

    From Mason Hawkins' Longleaf Partners Fund third quarter 2013 commentary.  


  • Mason Hawkins' Longleaf Partners Comments on Aon

    For the YTD, Aon (AON), the world's largest insurance broker and a leading benefits management firm, was among the Fund's largest contributors as the company's lower tax rate and increasing cash flow helped drive a 35% return. Higher interest rates will increase fiduciary income and help close the gap in the underfunded pension. Although nascent, Aon's healthcare exchange for corporate employees is gaining critical mass, most recently adding Walgreen Co in the third quarter. We applaud Greg Case and his team for their customer- focused, shareholder-oriented leadership.

    From Mason Hawkins' Longleaf Partners Fund third quarter 2013 commentary.  


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