Mason Hawkins

Mason Hawkins

Last Update: 02-24-2017

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 Comments on CONSOL Energy

    Also previously mentioned, CONSOL Energy (NYSE:CNX), the Appalachian coal and natural gas company, was down 76% in 2015 after falling 19% in the fourth quarter as the company missed operating cash flow (OCF) estimates amidst declining coal and gas prices. Management is adjusting to lower commodity prices and adopted significant cost controls under zero-based budgeting while still growing natural gas production. We filed a 13-D during the third quarter to discuss with third parties as well as management and the board a potential monetization or separation of the valuable Marcellus and Utica gas assets. This has been a constructive process since filing, and we appraise these assets at worth demonstrably more than CONSOL’s total equity capitalization. CONSOL’s exploration and production (E&P) business is unique, with low cost reserves given the company’s fee ownership of many acres. CONSOL announced in the fourth quarter that its thermal coal business, which enjoys a low cost position, had contracted for 93% of production for 2016 at a confirmed price of $50-55 per ton, providing near-term downside coal business risk mitigation. Multiple directors recently purchased shares.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners Comments on Chesapeake Energy

    As noted, Chesapeake Energy (NYSE:CHK), the second largest producer of natural gas in the U.S., declined 39% in the quarter and 77% for the year, making it the largest detractor of performance in both periods. Options accounted for 40% of our position and slightly half of our return. Fears related to further declines in energy prices drove the stock lower, despite CEO Doug Lawler’s progress in areas he could control. After reaffirming the company’s untapped $4 billion revolving credit facility and renegotiating a deal with Williams (pipeline operator), in the fourth quarter Chesapeake turned to restructuring its debt. Chesapeake offered to exchange various unsecured debt securities at a discount to par for secured debt with a later maturity. Pushing out due dates coupled with reducing overall debt outstanding should help the company weather a sustained low energy price environment.


    Over the year we adjusted our appraisal of Chesapeake to account for the tumble in oil and natural gas prices. Even with the depressed energy prices of today and little growth in that price as indicated by the futures strip pricing, the company’s non-producing assets have value that is not reflected at all in the stock price. Asset sale transactions in basins where Chesapeake operates helped validate our appraisal. We expect the company will continue to reduce costs while also seeking asset sales at fair prices. We are mindful of the risks associated with commodity companies. Once the debt restructuring was announced, we added to higher parts of the company’s capital structure that became particularly discounted.

      


  • Longleaf Partners Comments on McDonald’s

    During the quarter, we began exiting our successful investment in global quick service restaurant operator McDonald’s (NYSE:MCD) and completed the sale in the first week of 2016. The stock was a strong contributor for the year, up 31%, and the last three months, up 21%. When we initially purchased the company in late 2014, we believed management could overcome short-term obstacles and turn around same-store sales in certain struggling markets. Additionally, we saw optionality in the value of the company’s real estate assets. Over the course of our investment, McDonald’s hired a new CEO, Steve Easterbrook, a move welcomed by investors. His plan to revive the business both operationally and structurally helped drive the stock price. Although management and the board decided not to monetize the real estate assets, the stock price reached our appraised value in an unexpectedly short period. Over the year plus that we owned the stock, it gained 34% and was among the strongest contributors to performance. We appreciate the board’s and management’s solid execution. We hope that Mr. Market gives us an opportunity to partner with them in the future.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners Comments on CK Hutchison

    CK Hutchison (HKSE:00001), a conglomerate comprised of the non-real estate businesses from the June merger between Cheung Kong and its subsidiary, Hutchison Whampoa, returned 23% during 2015 when combined with Cheung Kong Property. The corporate transaction helped remove holding company discounts and clarify business line exposures by splitting the conglomerate between the property business (Cheung Kong Property Holdings) and the non-property business (CK Hutchison Holdings). The transaction is likely to be viewed as a seminal event leading to improved governance and structure for other complex conglomerates in Asia. Chairman Li Ka-shing and his son, Victor Li, have demonstrated a track record of building businesses and buying and selling assets at compelling values.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners Comments on Wynn Resorts

    Another notable contributor in the quarter, Wynn Resorts (NASDAQ:WYNN), the luxury gaming and hotel company with prime real estate in Las Vegas, Boston, and Macau, was up 31% but down 47% since we first added the position earlier in the year. The stock became deeply discounted as China’s anti-corruption campaign pressured revenues in Macau where Wynn is among six current operators and is scheduled to open the Wynn Palace in Cotai in June 2016. During the recent quarter, Macau sentiment began to turn as revenues stabilized. CEO Steve Wynn demonstrated his commitment and confidence in the business, purchasing over one million shares in early December and bringing his stake in the company to nearly 11%. Year-over-year comparable gross gaming revenues should improve in 2016, and Wynn cash flow will be bolstered with the Cotai property coming online. Longer term, we believe the company can generate impressive returns. Macau revenues from mass and premium mass visitors should grow with added non-gaming attractions, needed hotel room supply, and infrastructure improvements that bolster arrivals. Additionally, the Wynn Everett is in early site preparation with a strategic location just outside of Boston, but its value is not reflected in the stock price because it is several years from opening. Opportunities to partner with proven value creators like Steve Wynn at such a large discount to our appraised value exist over time, but rarely do we see one where the near-term market extrapolations are so distinct from the long-term earnings power of the company.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners Comments on Alphabet

    Alphabet (NASDAQ:GOOGL) (formerly named Google) gained 51% for the year on the back of a 25% rise in the fourth quarter. The company reported strong revenue growth year-over-year across the U.S., U.K., and the rest of the world. The bear case that the move to mobile search would be detrimental to revenues and market share seemed to fade. Mobile queries now outnumber desktop queries in important countries, and mobile revenue per click is improving. Alphabet segment YouTube’s growth remained strong, and the company announced a new pay tier named Red. Disclosure should improve with new reporting of segments in January. During the fourth quarter, a new share buyback program was authorized, further affirming the company’s attention to capital allocation.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners Comments on Level 3 Communications

    After being a top contributor in the fourth quarter and adding 25%, Level 3 Communications (NYSE:LVLT) gained 10% for the full year. Over the course of the year, operating metrics continued to improve. During the fourth quarter, company segment Core Network Services’ (CNS) organic revenue grew 6% year-over-year. Within CNS, Enterprise revenue grew 8%. This revenue growth, combined with the synergies created by the merger with tw telecom, resulted in margin expansion. The high contribution margins, which are currently over 60%, have been one of the focal points of our Level 3 investment case and are one of the primary drivers of high growth in both EBITDA (earnings before interest, taxes, depreciation and amortization) and FCF (free cash flow) growth. In 2016, we believe the company will generate approximately $5.00/ share of FCF before discretionary growth capital expenditures, which translates to approximately 10x FCF on current price. The company’s success-based growth capex is tied to new, high margin, revenue-producing contracts. Given management’s excellent execution, we expect leverage ratios to continue to improve from their current 4x debt/EBITDA levels into the 3x’s.


    From Longleaf Partners Fund 4th quarter commentary.

      


  • Longleaf Partners 4th Quarter Fund Commentary

    Longleaf Partners Fund’s 5.47% advance in the quarter brought the 2015 return to -18.80%. These results fell below the S&P 500’s gains of 7.04% and 1.38% for the same periods. The Fund’s energy-related holdings were the leading detractors for the quarter and the year due to the sharp decline in energy prices. Since its inception, the Fund has outperformed the index.

      


  • Larry Robbins Exits McDonald's, Paypal, Fossil

    Larry Robbins (TradesPortfolio) of Glenview Capital Management sold out several stakes in the third quarter.


    Glenview Capital Management, founded in 2000 by Larry Robbins (Trades, Portfolio), is a privately held investment management firm. Following are the trades with a high impact on the portfolio.

      


  • Mason Hawkins' Firm Bets on Cost-Cutting Efforts at Consol Energy

    Following a small sale last month, the Mason Hawkins (Trades, Portfolio)-led Southeastern Asset Management upped its stake in Consol Energy (NYSE:CNX) by about 15% Monday, picking up more shares as energy stocks continue to lower.

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  • Microsoft, Intel and National Oilwell Varco Have High Dividend Yields in Bill Nygren's Portfolio

    Bill Nygren (Trades, Portfolio) is portfolio manager of The Oakmark Fund, The Oakmark Select Fund and the Oakmark Global Select Fund. Nygren and his partners invest in companies they believe trade at a substantial discount to what they consider to be the true business value.


    National Oilwell Varco Inc. (NOV)

      


  • Mason Hawkins Increases FedEx Stake by 25%

    Mason Hawkins is primarily a value investor similar to Benjamin Graham and Philip Fisher. These legendary gurus look for businesses with good management, good people, and companies that sell for deep discounts significantly less than their intrinsic value.


    Hawkins founded Southeastern Asset Management in 1975 and is the chairman and CEO for the company. Hawkins and his team of long-term value investors look to build portfolios primarily focusing on 18 to 22 stocks at any given time, looking at a wide range of industries. Hawkins believes that concentrating allows for adequate diversification, while providing some of the best opportunities to maximize returns, and minimize loss of principal.

      


  • Loews, Scripps Networks Among Mason Hawkins' Attractive Holdings

    Mason Hawkins (Trades, Portfolio) has been the chairman and CEO of Southeastern Asset Management since 1975. The firm is a value investment firm and looks for three things in a business: good business, good people and a good price. He seeks to invest in businesses that are easily understandable, have strong balance sheets, are run by capable and shareholder friendly management, and trading at less than intrinsic value. The company will ascertain the intrinsic value of the business by looking at the asset value of the business or calculating the present value of future free cash flow. He is a very concentrated investor, normally holding less than 25 stocks in a portfolio at any given time.


    Here are three companies from the portfolio that we find interesting at current levels:

      


  • Longleaf Partners' Semiannual Investor Meeting Slide Presentation



  • Longleaf Partners' Semiannual Investor Webcast Transcript



  • Mason Hawkins Reduces Portfolio in 3 Holdings

    Legendary investment guru Mason Hawkins sold 51,700,581 shares from his portfolio in Triangle Petroleum Corp. (TPLM), Level 3 Communications Inc. (NYSE:LVLT) and Loews Corp. (NYSE:L).


    Hawkins is primarily a value investor similar to Benjamin Graham and Philip A. Fisher. These legendary gurus looked for businesses with good management, good people and companies that sold for discounts significantly lower than their intrinsic values.

      


  • Mason Hawkins Buys Stakes in du Pont, Tribune Media in 3rd Quarter

    Value investor Mason Hawkins (Trades, Portfolio), chairman and CEO of Southeastern Asset Management, says he looks for “good business, good people and a good price” when looking for investment opportunities. Using those criteria, he found several options in the third quarter.


    Hawkins’ most noteworthy third-quarter transaction was his purchase of a 7,810,399-share stake in E.I. du Pont de Nemours & Company (NYSE:DD), a Wilmington, Del.-based chemical company, for an average price of $53.37 per share. The deal had a 3.18% impact on Hawkins’ portfolio.

      


  • Mason Hawkins' Fund Takes 10% Stake in Actuant Corp.

    Mason Hawkins (Trades, Portfolio) has announced a 6,206,894-share stake in Actuant Corp. (NYSE:ATU), taking over 10.4% of the small-cap company that has a business predictability rating from GuruFocus of one star and a P/E ratio near a 10-year high.


      


  • Investor Day Details Key Initiatives for McDonald’s

    On Tuesday, Nov. 10, McDonald’s (NYSE:MCD) held its Investor Day with a number of significant announcements and initiatives influencing the stock’s price. Already performing strongly among its peers the company’s turnaround plan, discussed in detail on Nov. 11, has the company set up for even further gains over the long term.


    Year to date McDonald’s has gained 20.83%, substantially outperforming its closest competitors Wendy’s (NASDAQ:WEN) and Restaurant Brands International (NYSE:QSR). For the year, Wendy’s is up 5.98% while Restaurant Brands International is down 8.60%.

      


  • Tom Gayner's Holdings Trading Below the Peter Lynch Value

    Tom Gayner (Trades, Portfolio) is the executive vice president and chief investment officer of Markel Corp. (NYSE:MKL) and president of Markel Gayner Asset Management Inc., Markel's investment subsidiary since December 1990. From the114 stocks in his portfolio, the following are the holdings that are trading with a wider margin of safety, according to the Peter Lynch Value.


    Graham Holdings Co. (GHC) is trading at $575, and the Peter Lynch value gives the stock a fair price of $1,676.4, giving the stock a margin of safety of 66%.

      


  • Longleaf Partners Comments on Cable ONE

    We sold several of the Fund’s investments in the quarter, including our position in Cable ONE (NYSE:CABO) after Graham Holdings spun it out at the beginning of the quarter. The stock sold for our estimate of fair value. We applaud Graham Holdings’ CEO Don Graham for his ongoing efforts to build and recognize value for shareholders.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on Tribune Media

    We purchased Tribune Media (NYSE:TRCO) and one other holding during the quarter. We previously invested profitably in Tribune via its distressed bonds when the company went through bankruptcy. After completing the spin-off of its publishing business last year, Tribune is now a diverse mix of television and digital properties spanning news, entertainment, and sports. The company owns or operates 42 broadcast stations, representing the country’s largest combined independent station group. Additionally, Tribune’s spectrum ownership is uniquely valuable given its concentration in large, coastal cities. Management’s capital allocation discipline has beendemonstrated by repurchasing undervalued shares and selling off non-core assets at compelling prices.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (NYSE:LVLT) declined 17% as concerns about near term top-line growth rates outweighed improvement in margins and free cash flow (FCF) generation. During the quarter, the company reported organic revenue growth across North America and EMEA (Europe, Middle East, and Africa) in-line with expectations, while Latin America, which represents approximately 10% of consolidated revenue, had weaker growth mainly due to currency. The integration of tw telecom remains on track with synergy realizations ahead of schedule. Level 3 already has achieved approximately $115 million of annualized run-rate EBITDA synergies and the company should achieve 70% or $140 million of its annualized synergy target by the end of the first quarter of 2016. FCF growth at Level 3 is ramping up and, we believe, marching toward explosive FCF growth on a per share basis in the next few years as a result of the business’ strong incremental margins, the aforementioned tw telecom synergies, and continued debt reduction and refinancing. During the quarter, major bond rating agencies upgraded approximately $11 billion of the company’s rated debt and credit commitments, further proof of Level 3’s improving business and financial profile.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN), the luxury gaming and hotel company with properties in the United States and Macau, was also down in the third quarter, by 46%. Wynn Palace-Cotai is expected to open in March, and the company commenced site remediation for Wynn Everett-Boston, yet the stock price reflects no value for these assets before they generate revenues. While gross gaming revenue continues to decline in Macau, bears are extrapolating poor results forward and ignoring the potential for Wynn to gain market share next year upon the opening of Palace. The company sells for roughly our appraisal of its Las Vegas properties plus its Boston concession, after net debt. The stock price implies almost no value for Macau, even though the depressed market value of its 72% stake in Wynn Macau (down YTD from HKD 21.85 to HKD 8.78) is worth around $50 per Wynn share. Even bear case analysts project higher visitors and revenues in Macau over the next five years, but the uncertainty of the next 12 months translates into minimal value for Wynn’s Macau properties today.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on DreamWorks Animation

    Film studio DreamWorks Animation (NASDAQ:DWA) was down 34% in the quarter. A change in accounting for DreamPlace sales, currency impacts, and slower-than-expected merchandise licensing agreements cut in half revenue guidance for its developing Consumer Products division. We believe merchandise licensing will gain traction over time and deliver more recurring revenues, offering significant upside to our DreamWorks appraisal. DreamWorks’ other core businesses performed well. The strong results of the feature film Home highlights the company’s creative talent in generating engaging content that will build the film library. In addition, newer growth initiatives in the Television segment continued to ramp strongly, and the New Media segment, which contains AwesomenessTV, doubled revenues with strong gross margins.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on CONSOL Energy

    One of the noted energy holdings, CONSOL Energy (NYSE:CNX), the Fund’s largest performance detractor, fell 55% in the quarter after disappointing revenue and earnings on weaker-than-expected thermal coal production and negative natural gas differentials versus the New York Mercantile Exchange. Management is adjusting to lower commodity prices with cost controls and took steps to recognize the value of CONSOL’s coal assets by offering shares in the MLP CNX Coal, which generated $200 million in proceeds. We filed a 13-D during the quarter to discuss with third parties as well as management and the board a potential monetization or separation of the valuable Marcellus and Utica gas assets. We believe these assets alone are worth demonstrably more than CONSOL’s total equity capitalization. They are unique, low cost reserves given the company’s fee ownership of many acres. CONSOL is exploring monetization paths for all of its assets, including thermal coal, metallurgical coal, pipelines, and the Baltimore port terminal.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on HollyFrontier

    HollyFrontier (NYSE:HFC), the independent petroleum refiner that owns and operates five refineries throughout the Mid-Continent, Southwest and Rocky Mountain regions, rose 14% in the quarter prior to our selling the stock as it approached our appraisal. As a refiner, HollyFrontier benefitted from lower feedstock cost and more miles driven from increased demand for gasoline. CEO Mike Jennings bought in undervalued shares and focused on projects with master limited partnership (MLP) potential amidst the market’s thirst for yield. This strategy helped the stock price rise to intrinsic value, as HollyFrontier appreciated 55% over our short holding period.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Comments on ViaSat

    Integrated satellite company ViaSat (NASDAQ:VSAT) was the largest positive contributor in the quarter, up 7%. While the company had a slight decline in Exede broadband subscribers, averagerevenue per user (ARPU) was up 7% year-over-year and churn was also down. ViaSat captured good margin performance at its government and satellite services segments. The government segment posted its best growth performance in two years, along with a healthy order book and a 22% increase in backlog. ViaSat still plans the launch of its next generation ViaSat-2 satellite in 2016, which will further improve the company’s ability to deliver superior broadband technology across a larger customer base.


    From Longleaf Partners' third quarter 2015 commentary.

      


  • Longleaf Partners Small-Cap Fund Commentary 3Q 2015

    Sharp energy price declines resulted in our energy holdings becoming further depressed. Oil prices fell more than 50% over the last year—something that has happened less than 2% of the time in the last 115 years.1 China macro fears impacted companies with Asian exposure. The media industry broadly declined after several large businesses reported declining U.S. ad revenues in August, sparking fears over the long-term health of the television business. Stock price declines were not reflective of changes to underlying business appraisals. We continue to see a high level of value-additive corporate activity across the entire portfolio, at both top contributors and those businesses that declined the most in the quarter.

      


  • The Stocks in Mason Hawkins' 'Crash Bucket'

    In Southeastern Asset Management’s third quarter letter, managers discussed three categories of their holdings, the third of which they dubbed a “crash bucket.” Stocks in this elite group consisted of their energy holdings, which as a group had declined more than 60% year to date.


    Managers viewed the “crash bucket” in a positive light, saying companies' recovery would eventually bestow “a large part of our significant potential future return.” But all of the stocks save one, Wynn (NASDAQ:WYNN), fell into the energy category, whose price revival depends largely on a recovery of oil prices. Southeastern, where investor Mason Hawkins is chairman and CEO, disagreed that the stocks depended on an upswing in oil, however.

      


  • Southeastern Asset Management Comments on National Oilwell Varco

    We also initiated a position via options in National Oilwell Varco (NYSE:NOV), the leading global provider of equipment used in offshore and land drilling. Fear of a prolonged downturn in deep water rig orders is more than accounted for in the current price and is giving us an opportunity to invest in a high-quality franchise during a cyclical trough. The company holds a dominant market position due to its scale, trusted brands, and large installed base of equipment. Shareholders are benefitting from a 5% dividend yield while waiting for the rig building cycle to resume. Additionally, CEO Clay Williams is a strong capital allocator who we believe should continue to build value through share repurchases and acquisitions of distressed companies.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (NYSE:LVLT) declined 17% as concerns about near term top-line growth rates outweighed improvement in margins and free cash flow (FCF) generation. During the quarter, the company reported organic revenue growth across North America and EMEA (Europe, Middle East, and Africa) in line with expectations, while Latin America, which represents approximately 10% of consolidated revenue, had weaker growth mainly due to currency. The integration of tw telecom remains on track with synergy realizations ahead of schedule. Level 3 already has achieved approximately $115 million of annualized run-rate EBITDA synergies, and the company should achieve 70% or $140 million of its annualized synergy target by the end of the first quarter of 2016. FCF growth at Level 3 is ramping up and, we believe, marching toward explosive FCF growth on a per share basis in the next few years as a result of the business’ strong incremental margins, the aforementioned tw telecom synergies, and continued debt reduction and refinancing. During the quarter, major bond rating agencies upgraded approximately $11 billion of the company’s rated debt and credit commitments, further proof of Level 3’s improving business and financial profile.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on Chesapeake Energy

    One of the largest producers of natural gas, natural gas liquids, and oil in the U.S., Chesapeake Energy (NYSE:CHK) declined 34% in the quarter. In line with our exposure, about 60% of the impact came from the options we own and the remainder from the common equity. Concerns remain over the company’s liquidity profile, but management made major strides to improve realizations by successfully renegotiating two contracts with pipeline operator Williams that reduces transportation costs. Additionally, on October 1 the company announced the renewal of its $4 billion credit facility. Comparable asset sales in overlapping basins, such as Encana’s sale of Haynesville assets, further confirmed our appraisal of Chesapeake. The company’s shares remain more heavily discounted than its peers, yet CEO Doug Lawler is keenly focused on realizing value for shareholders even in this depressed energy price environment. Further reducing costs, including the recently announced 15% headcount reduction, coupled with asset divestitures, should lead to a stock price more in line with intrinsic value, which we appraise at twice the current price assuming the underlying commodity prices remain depressed.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on CONSOL Energy

    CONSOL Energy (NYSE:CNX) fell 55% in the quarter after disappointing revenue and earnings on weaker-than-expected thermal coal production and negative natural gas differentials versus the New York Mercantile Exchange. Management is adjusting to lower commodity prices with cost controls and took steps to recognize the value of CONSOL’s coal assets by offering shares in the master limited partnership (MLP) CNX Coal, which generated $200 million in proceeds. We filed a 13-D during the quarter to discuss with third parties as well as management and the board a potential monetization or separation of the valuable Marcellus and Utica gas assets. We believe these assets alone are worth demonstrably more than CONSOL’s total equity capitalization. They are unique, low cost reserves given the company’s fee ownership of many acres. CONSOL is exploring monetization paths for all of its assets, including thermal coal, metallurgical coal, pipelines, and the Baltimore port terminal.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN), the luxury gaming and hotel company with properties in the United States and Macau, was down 45% in the third quarter. Wynn Palace-Cotai is expected to open in March, and the company commenced site remediation for Wynn Everett-Boston, yet the stock price reflects no value for these assets before they generate revenues. While gross gaming revenue continues to decline in Macau, bears are extrapolating poor results forward and ignoring the potential for Wynn to gain market share next year upon the opening of Palace. The company sells for roughly our appraisal of its Las Vegas properties plus its Boston concession, after net debt. The stock price implies almost no value for Macau, even though the depressed market value of its 72% stake in Wynn Macau (down YTD from HKD 21.85 to HKD 8.78) is worth around $50 per Wynn share. Even bear case analysts project higher visitors and revenues in Macau over the next five years, but the uncertainty of the next 12 months translates into minimal value for Wynn’s Macau properties today.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on Murphy Oil

    As one of our energy holdings, Murphy Oil (NYSE:MUR), an exploration and production company with a portfolio of global offshore and onshore assets, was a primary performance detractor, down 41% in the quarter, with approximately half of the impact coming from the equity we hold and the other half from the options. This happened despite beating estimates on production and operating cash flow (OCF) and raising production estimates for the rest of the year. Murphy management is focused on driving costs lower and shortening drill times while improving production efficiency to reduce capex to cash flow levels. Furthermore, after disappointing international drilling results in recent years, the company will not invest in higher risk, higher cost wells at this time; instead, management plans to focus rig commitments and to allocate capital to higher return opportunities near lower-risk existing infrastructure where the company has had prior exploration success. Murphy remains well capitalized with diverse cash flow sources and an investment grade rating. It also has non-core pieces that could be monetized to unlock value. CEO Roger Jenkins continues to repurchase shares at the company level and invest personally.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on McDonald’s

    Another top contributor in the Fund, McDonald’s (NYSE:MCD) stock gained 5% in the quarter, demonstrating the resiliency we saw in 2008 when it was one of two stocks with a positive return in the Dow Jones. Since taking the helm of the company, CEO Steve Easterbrook has announced initial plans to reshape and turn around the business. Comparable store sales are showing broad signs of improvement in key international markets such as Germany and China. On the capital allocation front, the company continued to repurchase shares at a strong pace (7% annualized) and indicated that pace should continue. The company is also undergoing a review of its capital structure and working to re-franchise stores at attractive values.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Southeastern Asset Management Comments on Google

    The portfolio’s largest contributor during the quarter, Google (NASDAQ:GOOGL), rose 17% on the back of strong operating results and an announced new corporate structure. The company’s core search and display business demonstrated healthy, accelerating organic revenue growth. The move to mobile search is helping Google, rather than hurting it as some bears had feared. YouTube is also performing well, as its average viewing session per user on a mobile device is over 40 minutes, up more than 50% year-over-year. Beginning in the fourth quarter, Alphabet Inc. will replace Google Inc. as the publicly-traded entity. Google will become a wholly-owned subsidiary of Alphabet, and all outstanding Google shares will convert into the same number of shares of Alphabet. This means the company will report two segments—the search and YouTube core business and all other business lines. Management believes the new structure will allow for more management scale and accountability as each Alphabet subsidiary will have its own CEO. Larry Page, Sergey Brin, and Ruth Porat will remain in their same roles as CEO and Co-Founder, Co-Founder, and Chief Financial Officer.

    From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.  


  • Mason Hawkins' Longleaf Partners Q3 Commentary

    Longleaf Partners Fund was down 19.78% in the third quarter, trailing the S&P 500 Index’s 6.44% decline. Year-to-date (YTD) declines were 23.02% for the Fund versus 5.29% for the index. Only three times in the history of the Fund has quarterly performance been down more. Historically, performance rebounded strongly. Since its inception, the Fund has outperformed the index.


    Over the last three months, several of our companies’ stocks suffered from the broad fears that China’s slower economic growth would negatively impact parts of their underlying businesses, but our energy investments continued to be a primary driver of underperformance. Oil prices fell more than 50% over the last year—something that has happened less than 2% of the time in the last 115 years.1

      


  • Mason Hawkins Adds to Stake in Wynn Resorts

    Mason Hawkins (Trades, Portfolio) of Southeastern Asset Management increased an existing stake in Wynn Resorts Ltd. (NASDAQ:WYNN) by nearly 71% on Sept. 30.


    Hawkins purchased 5,091,254 shares of Wynn Resorts, a Paradise, Nev.-based developer and operator of hotels and casinos in the U.S. and China, for $53.12 per share. The transaction had a 1.75% impact on Hawkins’ portfolio.

      


  • David Einhorn Digs Coal

    According to a press release from Consol Energy (NYSE:CNX) on June 30 certain funds managed by Greenlight Capital have agreed to purchase 5,000,000 shares of the newly issued CNX Coal Resources LP (NYSE: CNXC) at the IPO price of $15.00 per share in a private placement. The IPO was completed in July with CNX selling a 21.1% stake of CNXC to the public and an additional 21.1% stake to Greenlight Capital in the private placement. Consol Energy continues to own 53.4% of the company and 100% of the General Partner which has a 2% interest.


    What is CNX Coal Resources LP? It is a growth-oriented master limited partnership, sponsored by Consol Energy. CNX Coal Resources owns a 20% undivided interest in Consol Energy's Pennsylvania thermal coal mining complex (Bailey, Enlow Fork and Harvey mines). They have been granted the right of first offer to acquire the remaining 80% undivided interest in the complex if they choose. The complex has generated about 80% of Consol Energy's coal sales in 2015. The complex consists of three underground mines and related infrastructure that produce high-BTU bituminous thermal coal that is sold primarily to electricity generators in the eastern United States.

      


  • Mason Hawkins Reduces or Adds to Stakes in His Portfolio

    A renowned financier, Mason Hawkins (Trades, Portfolio) has been in the investment business for four decades. He founded Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, which enjoyed returns of 4.92% last year, 32.12% in 2013 and 16.53% in 2012.


    Hawkins is a value investor, but, in the second quarter, he found far more value in stakes he already owns than in stakes he could acquire. Nearly all of Hawkins’ second quarter transactions involved reducing or adding to stakes that were already in his portfolio. He bought no new stakes in the second quarter and sold out only two – Bank of New York Mellon Corp. (NYSE:BK) and Mondelez International Inc. (NASDAQ:MDLZ).

      


  • Mason Hawkins Adds to Stake in Consol Energy

    Energy stocks are second on his preferred list, but Mason Hawkins (Trades, Portfolio)’ recent investment activity has made two energy stocks the largest in his portfolio by volume.


    Consol Energy (NYSE:CNX), a Pennsylvania-based company with interests in coal and natural gas production, has been in Hawkins’ portfolio for years but never at the volume he has reached in the last couple of quarters.

      


  • Mason Hawkins' Highest Performing Stocks

    Mason Hawkins (Trades, Portfolio) has been Chairman and Chief Executive Officer Southeastern Asset Management since 1975, and he and his partners manage the Longleaf Partners Funds. Since then, the firm's investment philosophy has been to consistently employ the time-tested value approach to long-only equity investing, based on owning strong businesses with good people at deeply discounted prices.


    Today, the fund is composed of 30 stocks, and 6 have been bought during the last quarter. The total value of the portfolio is $15,932 million with 12% Q/Q turnover.

      


  • Hawkins’ Longleaf Buys Consol Energy at One-Year Low Price

    Mason Hawkins (Trades, Portfolio)’ Longleaf Partners on Monday made another purchase of shares of its third largest holding Consol Energy (NYSE:CNX) as the stock fell to a 52-week low, according to Real Time Picks data.  


  • Longleaf Partners Small-Cap Fund Commentary Q2 2015

    Longleaf Partners Small-Cap Fund lost 1.27% in the quarter, trailing the Russell 2000 Index’s 0.42% return. Year-to-date the Fund returned 4.64% versus the index’s 4.75%. Over longer periods, the Fund’s performance surpassed the index. For the last three and five years, Longleaf Small-Cap far exceeded our annual absolute return goal of inflation plus 10%, as it did for the last 20 years.


    In the second quarter, the majority of our companies made positive business progress, as our management partners took smart actions to drive value growth. Although most investments were positive performers in the quarter, much of our partners’ value-building efforts at the businesses we own is not being fully reflected in the fund’s returns. Our energy-related companies, where a meaningful amount of beneficial activity has occurred and is ongoing, were the largest drag on relative and absolute performance. Our 15.5% net cash position and underweighting to the index’s top performing sector, healthcare, also weighed on relative returns.

      


  • Longleaf Partners Fund Commentary Q2 2015

    Longleaf Partners Fund’s 2.98% decline in the quarter brought the year-to-date return to -4.03%. These results fell below the S&P 500 Index’s returns of 0.28% and 1.23% for the same periods. For the last three and five years, the Partners Fund exceeded our annual absolute return goal of inflation plus 10%, despite falling short of the index. The Fund’s disappointing results over the last year have negatively impacted our longer-term relative performance. Large swings in relative returns are not unusual in our concentrated portfolio and have contributed to our outperformance over 15+ year periods.

      


  • Longleaf Partners Funds Q2 2015 Shareholder Letter

    One of Southeastern’s distinguishing aspects is that we maintain concentrated portfolios for the Longleaf Funds, seeking to invest only in companies that meet our stringent criteria for strong businesses, run by good management, available at deeply discounted prices. This discipline is critical to meeting our absolute return goal of inflation plus 10% and has produced strong long-term relative returns over most of our firm’s 40 year history. However, because the makeup of the Longleaf Funds will be materially different than their indices, our returns will diverge from them, often sharply. These wide swings impact not only short-term returns but can create an end point that weighs on longer term relative results as well. In the recent quarter, the International Fund outperformed its benchmark with the help of several corporate transactions, while the three other Longleaf Funds trailed their respective indices. At this time last year, the Partners, Small-Cap, and Global Funds exceeded their indices over a twelve month time frame, but currently, only the Small-Cap is outperforming the benchmark for the last year.

      


  • Mason Hawkins Buys More Than 27 Million Shares of Royal Phillips

    At the end of the first quarter, Mason Hawkins (Trades, Portfolio)’ stake in Royal Philips NV (NYSE:PHG) was the seventh-largest stake in his portfolio at nearly 17 million shares.


    But, as the second quarter was coming to an end – and because there was a significant gap between the seventh spot and the fourth spot in his portfolio – Hawkins, chairman and CEO of Memphis, Tennessee-based Southeastern Asset Management, nearly tripled his stake in the Dutch technology company, buying 27,069,910 shares for an average price of $25.46 per share, and Royal Phillips became Hawkins’ fourth-largest holding.

      


  • Mason Hawkins keeps on buying Triangle Petroleum

    Mason Hawkins (Trades, Portfolio) has been chairman and chief executive officer of Southeastern Asset Management since 1975, and its investment philosophy has been to consistently employ its time-tested value approach to long-only equity investing based on owning strong businesses with good people at deeply discounted prices. It seeks to reduce risk and deliver positive absolute returns for investors over time. Southeastern is 100% employee-owned and manages both the Longleaf Partners Funds and separately managed accounts for institutional clients.


    His portfolio is composed of 30 stocks and has a total value of $15,932 Mil.

      


  • Stay Away From David Einhorn's Fourth-Largest Bet

    David Einhorn's Greenlight Capital disclosed an equity portfolio valued at some $7.65 billion as of the end of the first quarter of 2015. The equity portfolio is mainly invested in Technology (48%), Consumer Discretionary (21%) and Industrials (14%) stocks.


    In a previous article we analyzed the top three positions held as of the end of March 2015. So now, let´s take a look at his fourth-largest position, Consol Energy Inc. (NYSE:CNX).

      


  • Hawkins' Longleaf Partners Triples Stake in Timber Company

    Longleaf Partners Funds, which is managed by Southeastern Asset Management where Mason Hawkins (Trades, Portfolio) is chairman and CEO, has nearly tripled its stake in Arkansas timber company Deltic Timber Corporation (NYSE:DEL) according to filings on June 10.


    Longleaf’s small cap fund holds 1,296,055 shares of the company, or 10.3% of its outstanding shares, after increasing the stake by 196.58%. The fund had started a position in Deltic Timber Corp in the third quarter of 2014 and has since been increasing the stake in each subsequent quarter.

      


  • Mason Hawkins Buys Stakes in Google, Five Other Companies in First Quarter

    Value investor Mason Hawkins (Trades, Portfolio) is observing his 40th anniversary as chairman and CEO of Southeastern Asset Management, where the emphasis is on “good business, good people, and a good price” when considering investing in a company.


    Southeastern Asset Management typically holds no more than two dozen stakes in each portfolio; Hawkins’ portfolio is a little higher than that with 30 stakes in it currently. Hawkins made half a dozen new buys in the first quarter, two of which – Wynn Resorts Ltd (NASDAQ:WYNN) and Google Inc (NASDAQ:GOOG) – landed in the top 20 most valuable stakes in his portfolio.

      


  • Mason Hawkins Comments on Mondelez International Inc

    We sold Mondelez (MDLZ) as price converged with our value. The stock returned 45% since our late 2012 purchase when Kraft spun out the global snacking and food brands, including Nabisco, Cadbury, and Trident, and renamed the company Mondelez. Although emerging market sales weakened, CEO Irene Rosenfeld preserved value per share through margin improvements, share repurchases, and value-accretive moves such as placing the coffee business in a joint venture with DE Master Blenders. This was our third successful investment in Nabisco’s brands. Each time we were able to purchase this juggernaut at a readily ascertainable discount, directly or through a larger company. We hope for another opportunity down the road.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on Travelers Companies Inc

    Travelers (TRV), a leader in property and casualty insurance, also reached our appraised value. We made a 144% return over our 4+ year holding period. Jay Fishman is among the best operators and capital allocators in the industry, and his record at growing book value, even in challenging periods, greatly rewarded the Partners Fund’s shareholders.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on Abbott Laboratories

    Abbott (ABT), a global healthcare company, reached our appraisal, resulting in a 120% return over our 4-year holding period. We are extremely appreciative of the value that CEO Miles White built for shareholders during our ownership.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on Wynn Resorts

    We added two new positions in the first quarter. Weakness in the Macau (China) gaming market provided the opportunity to purchase Wynn Resorts (WYNN) at a substantial discount to our appraisal. Wynn owns some of the world’s prime real estate through luxury gaming and hotel operations in Las Vegas and Macau as well as a future location outside Boston, Massachusetts. Through its 72% ownership of Wynn Macau, Wynn controls a gaming and hotel complex on the Macau peninsula and is completing an additional project in nearby Cotai. The company’s Wynn and Encore casinos are among the most profitable in Vegas, with a prime location on the Strip. Steve Wynn has been a successful owner- operator who has made money for shareholders over a long period. We bought Google as fears around a slowdown in the company’s dominant search and display advertising business became over-discounted in the market.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on CONSOL Energy

    CONSOL Energy (CNX) was down 17% on weak natural gas and coal prices. During the quarter the company reduced its capex budget and grew production strongly. The company is uniquely positioned to navigate these prices with low cost reserves and plans to monetize non-core assets, including the thermal coal master limited partnership (MLP) in mid-2015 and the met coal initial public offering (IPO) in late 2015. CONSOL is one of our most discounted holdings, and CEO Nick Deluliis expressed his agreement with a significant share repurchase announcement.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on Chesapeake Energy Corp

    The largest detractor in the quarter was Chesapeake Energy (CHK), one of the largest producers of natural gas, natural gas liquids, and oil in the U.S., which declined 27%. The company reported lower-than- expected price realizations and production in the fourth quarter. While the company cut 2015 budgeted capital expenditures (capex) over 40% versus 2014, the market was hoping for Chesapeake to balance lower cash flow with capex. The company maintains a flexible balance sheet, with $4 billion in cash and an additional $4 billion in an undrawn credit facility, which will allow CEO Doug Lawler to focus on driving the greatest value for shareholders for the long-term, either through the authorized $1 billion repurchase program, strategic acquisitions, or a combination of both. While our appraisal of the company has come down in the short-term with the collapse of oil and gas prices, the long-term thesis remains intact. Chesapeake’s second largest shareholder, Carl Icahn (Trades, Portfolio), recently increased his stake in Chesapeake by 10%, and Chairman Archie Dunham bought an additional $14 million at quarter-end. During the quarter we maintained our overall exposure to Chesapeake but switched half our position into options due to favorable pricing created by the panic and resulting volatility in energy markets. We also employed this approach to increase our exposure to Murphy. We viewed this as a rare opportunity to gain more downside protection while maintaining the upside benefit of higher stock prices. The Chesapeake options accounted for more than half of that position’s decline in the quarter.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (LVLT) appreciated 9% after another strong quarter of margin and revenue growth. The integration with recently merged tw telecom is proceeding smoothly as the transaction enhances Level 3’s competitive positioning with a complementary product set and larger footprint. Level 3’s growth in its North American enterprise business remains solid as CEO Jeff Storey and his team invest in expanding its fiber network and portfolio of connected buildings.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins Comments on CK Hutchison

    The Partners Fund’s largest positive contributor, CK Hutchison (HKSE:00001) (formerly Cheung Kong), announced its intention to merge with subsidiary Hutchison Whampoa and spin out the combined property company. This latest savvy move by founder and CEO Li Ka-shing should lessen the holding company discount on the stock as underlying business exposures are clarified and the spin off highlights the value of the combined property business. The stock gained 22% during the quarter. An independent valuer recently appraised CK Hutchison’s property business 48% higher than stated book.(1) The company’s high profile dramatic restructuring of a blue chip Asia conglomerate has the potential to unleash similar restructurings in the region.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.  


  • Mason Hawkins’ Longleaf Partners Fund Q1 2015 Management Discussion

    Longleaf Partners Fund declined 1.09% in the first quarter, trailing the S&P 500 Index’s 0.95% gain. While the Partners Fund has lagged the Index in the recent periods shown below, the Fund’s longer term outperformance over 15, 20, and 25 years reflects other stretches of falling behind the index followed by bursts of strong relative returns.


    Cumulative Returns at March 31, 2015

      


  • Longleaf Partners More Than Halves Stake in California Oil Company

    Longleaf Partners Funds, where Mason Hawkins (Trades, Portfolio) is chairman and CEO, has reduced its holding of California Resources Corp (NYSE:CRC) by 57.46%, according to Real Time Picks.


    The firm retains 14,244,200 shares of the company, representing 3.7% of the oil company's total outstanding shares. California Resources spun off of Occidental Petroleum on Nov. 30, in the same quarter that Longleaf reported starting its position of 33,481,500 shares. Longleaf, however, does not own Occidental Petroleum (NYSE:OXY) shares and bought California Resources on the open market. According to its Small-Cap Fund first quarter shareholder letter:

      


  • Mason Hawkins Increases Holdings in Murphy Oil

    Mason Hawkins (Trades, Portfolio) has been Chairman and Chief Executive Officer Southeastern Asset Management since 1975, and he and his partners manage the Longleaf Partners Funds. Mr. Hawkins attended the University of Florida where he earned a B.A. in Finance, and the University of Georgia where he earned an M.B.A. in Finance.


    Web Page: http://www.longleafpartners.com/

      


  • Mason Hawkins' First-Quarter 2015 Commentary

    The first quarter of 2015 saw a continuation of the themes from the second half of 2014. Almost all of our individual businesses delivered solid operating performance, and our management partners pursued productive ways to build long-term per share values. This activity produced strong excess returns in Longleaf Partners Small-Cap Fund,“which helped the Longleaf fund earn the No. 1 ranking among small-cap U.S. equities funds.” 1 By contrast, the Partners, International, and Global Funds’ relative performance remained challenged as solid company results could not overcome three ongoing broad headwinds: the fall in energy prices, the U.S. dollar strength, and the Chinese government’s pressure on Macau gaming. While these challenges affected only a handful of our holdings, they were large enough to offset the good results at the vast majority of our companies.


    The steady upward climb of the S&P 500 has intensified the debate over active versus passive investment approaches, and given this, we want to detail the reasons we are confident that our portfolios can outperform relevant benchmark indices and deliver on our absolute goal of inflation plus 10% over the long term.

      


  • Mason Hawkins Comments on Royal Philips NV

    Philips (PHG) fell 18% in the year and 8% in the fourth quarter. The company faced a number of short-term challenges including a one-time pension payment, a temporary suspension of production at its Cleveland, OH-based medical imaging plant, slower emerging market demand, and foreign exchange headwinds. Currency translation from euros into U.S. dollars accounted for approximately half of the price decline. The stock price does not reflect the ongoing transformation of the company under CEO Frans Van Houten who has substantially improved operating margins and focused the company over his 3+ year tenure. Philips’ discounted share price provided management the opportunity to execute another massive €1.5 billion share repurchase. In 2014 Philips announced plans to sell or spin off its Lumiled and auto lighting businesses and to split into two companies: Lighting Solutions and HealthTech, which will be comprised of the current Healthcare and Consumer Lifestyle businesses. We applaud the split. The “conglomerate discount” should disappear as each business stands on its own and is easier to compare to more pure-play peers that trade at higher multiples. Separate reporting will commence in January 2015, and the split is expected to happen by 2016.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on CONSOL Energy

    CONSOL Energy (CNX) dropped 11% in the fourth quarter and for the year in full. CONSOL’s management team took productive action to increase shareholder value despite a difficult coal and gas environment. In the second half of the year, Chairman Brett Harvey and CEO Nick Deluliis completed an IPO (initial public offering) for a midstream MLP (master limited partnership) at metrics above our appraisal. CONSOL most recently announced it would form an MLP to house its thermal coal business and form a subsidiary to own its metallurgical coal properties. These transactions should bring the value of its coal assets forward, improve the transparency into the value of these assets, and provide additional vehicles to access capital markets, while allowing the company to control the assets and realize synergies across its businesses. In addition, CONSOL authorized a share repurchase program for up to approximately 3.6% of the company.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on Murphy Oil

    Murphy (MUR) was down 20% in the year after an 11% decline in the fourth quarter. CEO Roger Jenkins took actions to recognize value including selling a 30% stake in Malaysian assets at a price above our appraisal. Murphy also bought back shares in 2014 and has authorization for more. The sharp decline in oil prices most heavily affected Murphy’s ownership in Syncrude’s Canadian oil sands, which represented less than 15% of our appraisal before oil’s drop and less today.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on Loews

    Despite being up 1% in the fourth quarter, Loews (L), the holding company owned and managed by the Tisch family, sold off with energy and was down 12% for the year. The company’s CNA insurance unit generated strong cash flow, but its stakes in energy companies Diamond Offshore (DO) and Boardwalk Pipelines Partners (BWP) declined 30% and 29% respectively. DO has the strongest balance sheet among drilling rig operators and should be able to upgrade its fleet cheaply as distressed sellers seek capital. BWP cut its dividend to invest in additional service points along its pipeline and expand its ability to transport gas from the northeastern U.S. Loews repurchased shares amounting to approximately 3.5% of the company and has substantial liquidity to take advantage of undervalued opportunities including additional shares.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on Chesapeake

    Chesapeake (CHK) declined 21% for the full year and 14% in the fourth quarter. Since Chesapeake’s heavily vested Board took over in mid-2012, the company has delivered the balance sheet and improved production from its irreplaceable 12 +million net acres of oil and gas fields. CEO Doug Lawler is driving value recognition in ways he can control – selling assets at reasonable prices, reducing debt, and increasing operating efficiencies in both corporate and production activity. In the first half of the year, Chesapeake sold non-core acreage in Oklahoma, Texas, and Pennsylvania and spun-off its oilfield services business into Seventy-Seven Energy, which we sold. In the fourth quarter, Chesapeake closed the sale of Marcellus and Utica assets to Southwestern Energy for $5 billion. This amounted to roughly 8% of Chesapeake’s production for nearly half its market cap. Management announced plans to use $1 billion of the proceeds to repurchase the heavily discounted shares.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 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 8% in the fourth quarter and 14% for the year. Aon’s private health care exchange business increased its scale, adding more than a dozen clients and aggressively growing the market. The company, led by CEO Greg Case, used $1.8 billion to repurchase almost 7% of shares in the first nine months of 2014, the highest amount since 2008. Aon authorized an additional repurchase plan of up to $6.1 billion, roughly 24% of outstanding shares.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Increases Holdings in CNX and DWA

    Mason Hawkins (Trades, Portfolio), Founder, Chairman and Chief Executive Officer of Southeastern Asset Management increased his holdings in two positions in his portfolio of 30 stocks total, with a value currently at $18.33 billion and a quarter-over-quarter turnover rate of 12%.


    When looking for businesses to invest in, Hawkins has three rules: The business must have good people working for it, the business must be strong, and lastly, the stock must be at a deeply discounted price. Sticking with these principles has earned him the Institutional Investor Lifetime Achievement Award in 2005, Equity Manager of the Year in 2007, along with other awards and nominees throughout the years.

      


  • Mason Hawkins Comments on Cheung Kong

    Hong Kong based conglomerate Cheung Kong (HKSE:00001) gained 15% in the year. Over the course of 2014, results at most of the company’s operating divisions were strong. Additionally, management made several value-enhancing asset sales across multiple business lines at low cap rates and used proceeds to opportunistically reinvest in discounted infrastructure deals outside of Asia with double-digit IRRs (internal rates of return). Management also returned proceeds to shareholders in the form of dividends. Most recently, in a joint venture with Mitsubishi Corp, Cheung Kong bought an airplane leasing portfolio. With its strong balance sheet, Cheung Kong can take advantage of Hong Kong land banking opportunities if prices correct.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on Berkshire Hathaway

    Berkshire Hathaway (BRK.A, BRK.B) appreciated 28% for the year after its fourth quarter gain of 10%. The company’s underlying operating businesses performed well. In insurance, GEICO revenues grew 10% driven 2/3 by units and 1/3 by pricing. Reinsurance endured no major catastrophes and some positive currency impact. BNSF grew 4% with gains in both volume and pricing. In the fourth quarter, Berkshire announced the acquisition of Duracell from Proctor & Gamble in a tax efficient exchange for appreciated Berkshire stock. The stock reached our appraisal, and we sold it. Berkshire rarely sells at enough of a discount to meet our criteria given its quality businesses and management, but we were able to purchase it for the second time in our history in 2012. The stock returned over 89% in our two year holding period.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on FedEx

    FedEx (FDX) rose 22% for the year and 8% in the fourth quarter. The company expanded operating margins in its Express, Ground and Freight segments over the year and executed on profit improvement initiatives. EPS (earnings per share) grew as did our appraisal. The company repurchased close to 10% of its shares. FedEx moved to further entrench itself in Ground delivery through expansion capex and the acquisition of Genco, which handles reverse logistics for retailer returns. FedEx expects to benefit over the next year from a healthy U.S. economy and lower fuel prices, which improve the relative cost of faster delivery via planes at a premium versus slower shipping via boats.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (LVLT) gained 49% and led the Fund’s performance for the year and the fourth quarter, up 8%. Level 3 provides critical infrastructure that connects businesses and consumers to the internet, allowing them to move voice, video and data. The company’s acquisition of tw telecom closed in the fourth quarter, significantly expanding its network reach in metropolitan markets and providing additional capacity to grow its enterprise customer base. Throughout the year, CEO Jeff Storey and his team delivered solid revenue growth, margin improvement, and higher free cash flow. The stock remains well below our value of its operating networks and non-earning dark fiber and conduit assets and is the Fund’s largest holding.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.  


  • Mason Hawkins’ Longleaf Partners Fund Q4 2014 Management Discussion

    Longleaf Partners Fund finished the year up 4.92% after a 1.46% gain in the fourth quarter. These results fell below the S&P 500’s returns of 13.69% and 4.93% for the same periods. During the first half of the year, the Fund kept pace with the Index despite having a greater than 20% cash balance. In the second half of 2014, the Fund lagged the S&P 500’s advance largely due to our energy-related holdings, which were leading contributors in the first half but sold off with the sharp decline in oil prices. We are disappointed in the recent performance, but remain confident in the quality of our businesses and management partners in the portfolio. For the last five years, Longleaf Partners Fund exceeded our annual absolute return goal of inflation plus 10%, despite falling short of the Index. Over longer term periods of 15+ years shown below, the Fund surpassed the Index.


      


  • Mason Hawkins' Longleaf Partners Annual Shareholder Letter 2014

    After strong returns across all the Longleaf Partners Funds in 2013, only the Small-Cap Fund in 2014 exceeded its benchmark index and our absolute return goal of inflation plus 10%. We are not pleased with the results in our Funds outside of Small-Cap over the last twelve months, but we do welcome the increased volatility and opportunity created as broad markets and stocks within those markets began to diverge in the second half of the year.


    We are seeing strong parallels in current markets versus the late 1990s that lead us to believe we will be returning to an environment where the merits of individual holdings are more likely to be properly weighed by the market and value investment approaches are more likely to be rewarded with solid absolute and relative returns. Based on the underlying fundamentals at our companies, the actions our management partners are taking, and the broader investing environment, we are confident that our portfolios are positioned for successful long-term compounding.

      


  • Mason Hawkins' Longleaf Partners Boosts Stake in 2 Companies

    Longleaf Partners Funds is company where famed investor Mason Hawkins (Trades, Portfolio) is chairman and CEO. On Dec. 10, Longleaf added shares to its positions in two stocks, GuruFocus reported: Dreamworks Animation (NASDAQ:DWA) and Level 3 Communications (NYSE:LVLT).


    Longleaf increased its holding of Dreamworks Animation by 76.4% and holds 8,548,945 shares after the transaction. The company’s shares have declined by about 39% year to date and closed at $21.71 on Wednesday.

      


  • Mason Hawkins Comments on Vivendi SA

    We initiated four new positions in the quarter: McDonald’s Corporation, Scripps Networks Interactive, Vivendi, and one undisclosed name. French company Vivendi (XPAR:VIV) consists of two key businesses — Universal Music Group, the world’s biggest record label, and Canal+ Group, France’s biggest pay-TV operator. The recent auction of Vivendi’s Brazilian broadband business, GVT (Global Village Telecom), highlights Chairman and 5% owner Vincent Bolloré’s focus on creating value for shareholders. Southeastern has invested in Vivendi successfully twice before, and the company’s focus, asset quality, and management team has grown even stronger.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Scripps Networks Interactive Inc

    We initiated four new positions in the quarter: McDonald’s Corporation, Scripps Networks Interactive, Vivendi, and one undisclosed name. Scripps (SNI), a multi-year holding in our Small-Cap Fund, owns various channels, including 100% of HGTV and 69% of The Food Network. Its market capitalization has grown enough for us to own this company in the Partners Fund, and our appraisal has kept pace so that the attractive discount remains.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on McDonald's Corp

    We initiated four new positions in the quarter: McDonald’s Corporation, Scripps Networks Interactive, Vivendi, and one undisclosed name. Food quality issues at McDonald (MCD)’s China supplier, minimum wage pressure in the U.S., Russian challenges, European macro concerns, and improvements at competing chains pressured the stock and enabled us to own the company’s valuable real estate and dominant breakfast business at a discount.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Loews

    For the YTD period Loews (L) was the Fund’s primary performance detractor, down 13% after a 5% decline in the quarter. The stock fell because of pressure on its energy-related investments in Diamond Offshore, the drilling company, and to a lesser degree Boardwalk Pipeline. Loews recently announced the sale of Highmount Exploration and Production in line with our anticipated price. Through the last reported period in July, the company aggressively repurchased shares.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Murphy Oil

    Over the last three months, Murphy Oil (MUR) declined 14%. CEO Roger Jenkins made value accretive moves, announcing sales of its UK downstream assets and of 30% of the company’s Malaysian assets at a price above our appraisal. Moreover, as the shares became more discounted, the company initiated a share repurchase program, a move that Jenkins properly views as buying their proven barrels of oil for much less than it would cost to drill new wells or buy other plays.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on CONSOL Energy

    CONSOL Energy (CNX) posted a negative 18% return in the quarter. Over half of our appraisal is attributable to the company’s gas reserves in the Marcellus and Utica shale plays. To monetize gas production value, Executive Chairman Brett Harvey and CEO Nick Deluliis successfully completed an initial public offering (IPO) of a midstream Master Limited Partnership (MLP) at metrics above both our appraisal and the projected price in the recent quarter. Approximately 40% of our appraisal is in CONSOL’s coal assets. As the low-cost producer in Appalachia due to its use of long wall mining methods, the company plans to shift more of its met coal sales to domestic customers — a competitive move that will pressure overleveraged, high cost producers. The company’s variety of assets, including the Baltimore port terminal, provides multiple options for gaining value recognition without reliance on commodity price increases.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Chesapeake

    Our appraisals of our three energy-related holdings did not fall in spite of large stock declines, because our models already incorporated lower commodity prices based on the futures curve pricing and the marginal cost of production in our various plays. Chesapeake (CHK) fell 20% in the quarter. While costs declined, capex remained on plan, and the company moved production estimates up slightly. During the two year tenure of the new board, balance sheet leverage has been reduced by $6 billion, primarily from noncore asset sales. CEO Doug Lawler is driving value recognition in ways he can control and is building additional upside with the $2–3 billion of annual discretionary capital spending that management projects should deliver strong returns on capital, even without higher commodity prices. The company’s 4.8 million net developed acres and 7.5 million undeveloped acres of oil and gas fields cannot be replicated.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Cheung Kong

    Although Cheung Kong (HKSE:00001) declined 7% in the third quarter, its 13% YTD return made this Hong Kong based conglomerate a large contributor for the year. In the first half, Hong Kong property sales were strong, and management made several value - enhancing asset sales across multiple business lines as well as returned capital to shareholders. More recently, Cheung Kong’s price was penalized amid protests and labor strikes in Hong Kong. Our appraisal remained intact. We are partnered with strong capital allocators who have not bought overpriced assets in China or Hong Kong. Cheung Kong’s strong balance sheet positions management to buy discounted land in the event of a real estate correction.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Bank of New York Mellon

    Bank of New York Mellon (BK) gained 4% in the quarter and 12% YTD. Expense controls helped results, although low market volatility and low rates this year have hampered revenue growth in asset services. The asset management business grew steadily along with the markets. The company emphasized the substantial earnings power that modest interest rate increases will create as money market fee waivers will end and net interest margins will expand. During the quarter BK repurchased almost 1% of outstanding shares, approximately one-third of the total buyback approved by the Federal Reserve.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Level 3 Communications

    Fiber and networking company Level 3 Communications (LVLT)’ 4% gain in the quarter took YTD return to 38%. Level 3 had a strong quarter with EBITDA (earnings before interest, taxes, depreciation and amortization) up over 20%, organic revenues up 7%, and positive free cash flow. The company’s purchase of tw telecom, announced in the second quarter, remains on track to close around year-end.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on Berkshire Hathaway

    Another large contributor for the quarter was Berkshire Hathaway (BRK.A BRK.B) which rose 9%. YTD the company advanced 17%. The company’s myriad of businesses performed well. In insurance, GEICO grew premiums 11% and wrote at a 92% combined ratio. Reinsurance was helped by few natural disaster claims. In rail, Burlington Northern’s revenues rose 8% as volumes increased and pricing improved, particularly in agricultural products following a record grain harvest and limited supply given increased oil shipments. Berkshire’s U.S. and U.K. utility revenues also grew. The manufacturing, service, and retailing businesses increased revenues and earnings. Overall, corporate revenues from these diverse businesses grew 6%, earnings increased 17%, and our appraisal increased.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Mason Hawkins Comments on FedEx

    FedEx (FDX), the largest contributor for the quarter and a major contributor YTD, rose 7% and 13% respectively. The company reported strong operating results led by Ground, where revenue grew 8% year-over-year and operating margins expanded toward 20%. Express had healthy U.S. volumes, and Freight saw both volume and revenue increases. While Ground remains the majority of our appraisal, Freight’s results were notable with 70% operating income growth and double-digit margins. Sustained operating performance in this division would drive future value growth. During the quarter, the company continued to demonstrate its pricing power. The company repurchased 5.3 million shares, an annualized rate of 7%, and authorized an additional 15 million shares.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.  


  • Longleaf Partners Q3 2014 Management Discussion



  • Mason Hawkins Comments on OCI

    OCI (XAMS:OCI), owned by Longleaf Small-Cap, International, and Global, consists of a legacy construction business and the much larger nitrogen fertilizer business. Natural gas is the primary component in nitrogen fertilizer production, and during the quarter, gas supply interruptions impacted production at OCI’s two Egyptian plants. Although the stock declined, our appraisal held steady, as it already incorporated 50% Egyptian utilization for 2014, and because OCI’s other plants around the world are operating at or near full capacity with low cost gas and higher prices for Ammonia and Urea, two primary outputs. The long-term case for OCI remains compelling as the company is the low cost industry leader in nitrogen fertilizer, essential for world food production. In the next 12–18 months the company will have higher production and lower capex with the opening of a greenfield plant in Iowa and the completion of the Beaumont, Texas extension. The company is also building the largest methanol plant in the country in Texas. CEO Nassef Sawiris has built and monetized substantial value historically; specifically, he has added enormous value for Southeastern’s clients and our partners in the Longleaf Funds through his work at Texas Industries and Lafarge. Most recently, he announced that in early 2015 OCI will separate the fertilizer and construction businesses to remove the conglomerate discount in the stock price.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Third Quarter 2014 Commentary.  


  • Mason Hawkins Comments on Melco International

    Melco International (HKSE:00200), the Macau gaming company held in the International and Global Funds, fell alongside all Macau gaming stocks. A meaningful drop in VIP visitors has led to lower revenues. The causes include China’s crackdown on corruption causing wealthier people to keep a lower profile away from Macau, slower Chinese economic growth hurting property sales that boosted gambler credit, and liquidity challenges faced by junket operators who organize VIP visits and extend credit to them. Other pressures impacting the stocks are difficult to quantify, such as tighter transit visa requirements, wage inflation and labor unrest, UnionPay credit card restrictions, and a smoking ban starting in October. The negative news flow did not impact our conviction in Melco. Our appraisal already incorporated lower growth in both VIP and mass revenues than most sell-side analysts had previously assumed for the year. Over 80% of Melco’s EBITDA (earnings before interest, taxes, depreciation and amortization) comes from the non-VIP segment that is still growing gross gaming revenue at 15%. This important mass market has margins several times higher than the margins on VIPs whose revenues are split with junket operators. 100% hotel occupancy also has limited growth this year, but planned new hotels should increase visitation over the next few years as should the new Hong Kong–Macau bridge that will allow passengers at the Hong Kong airport to arrive in Macau in half an hour. Melco has a near-term supply advantage with its Studio City casino and hotel opening in Q3 2015. Despite analyst downgrades on Macau gaming stocks, Melco is estimated to have high EBITDA growth in 2015 and 2016. The company began repurchasing shares in Melco Crown in September, and our partner, CEO Lawrence Ho, has bought more stock personally in the last two quarters.

    From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Third Quarter 2014 Commentary.  


  • Longleaf Partners Third Quarter Commentary

    Not only did those companies under the most price pressure meet our operating expectations, but their upside prospects increased due in large part to the actions of our CEO partners. To provide insight into these positions and why we continue to have long-term conviction in their potential to outperform, we discuss them below.


    In the U.S.

      


  • I Will Follow Bruce Berkowitz and Move Away From Chesapeake

    In this article, let´s consider Chesapeake Energy Corporation (NYSE:CHK), a $15.74 billion market cap, which has a trailing P/E ratio that indicates that the stock is relatively undervalued (a PE relatively small when compared to the industry median).


    So in this article, let's take a look at a model that is applicable to stable, mature, dividend-paying firms and try to find the intrinsic value of the stock. Although the model has a number of characteristics that make it useful and appropriate for many applications, it is by no means the be-all and end-all for valuation. The purpose is to force investors to evaluate different assumptions about growth and future prospects.

      


  • Longleaf Partners Fund Comments on Loews

    Although Loews (L) was flat in the second quarter, it remained a detractor YTD, down 9%. The first quarter price fell after underlying holdings Diamond Offshore (DO) and Boardwalk Pipeline (BWP) disappointed. In April, DO’s results improved, and the company announced its first share buyback since 2004. After being punished for cutting its dividend in February, BWP outlined several attractive potential projects going forward and recovered in the second quarter. Loews’ other major holding, CNA Financial Corp. had a solid quarter. Loews ramped up its own share repurchases given the discount in the stock and the lack of high-return alternatives for the company’s large net cash of over $8.50/share.

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


  • Longleaf Partners Fund Comments on Royal Philips NV

    Philips (XAMS:PHIA, PHG) declined 7% in the second quarter and 11% YTD. Foreign currency headwinds impacted reported sales, although comparable revenue was flat. Net debt increased as free cash flow (FCF, excess cash from operations) went to a one-time pension payment and share buybacks. A temporary suspension of production at a U.S. healthcare plant also impacted FCF. Management reaffirmed expectations for a “challenging” 2014, comprised of improved results at Consumer and Lighting but a continued drag from Healthcare. Management previously delivered on every aspect of 2013 targets and remains committed to 100-200 additional basis points (1 to 2%) of margin improvement by 2016. At quarter-end, the company announced plans to merge the LED and automotive lighting units into a standalone company with €1.4 billion in revenue and will explore strategic options for outside investment. This advances management’s “Accelerate” plan to concentrate Philips around Health and Wellness and fundamentally increase shareholder value.

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


  • Longleaf Partners Fund Comments on FedEx

    In the first quarter, terrible winter weather hurt FedEx (FDX) results, but the stock rebounded 14% over the last three months. When the price was weak, management repurchased almost 10 million shares at a discount, equating to a 13% annualized pace. The stock rose following strong revenue growth and profits in the Ground segment and higher package volume in Express. Management also set expectations for higher margins following the completed cost restructuring over the last two years. Our appraisal grew as the much more profitable Ground business outpaced the larger Express segment that receives most of analysts’ attention.

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


  • 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.  


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