Mason Hawkins

Mason Hawkins

Last Update: 02-14-2017

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

  • Southeastern Asset Management Comments on McDonald’s

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on National Oilwell Varco

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on Aon

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on CK Hutchison

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on CONSOL Energy

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on Scripps Networks

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


  • Southeastern Asset Management Comments on Wynn Resorts

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

    From Southeastern Asset Management's Q1 2016 shareholder letter.


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

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

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


  • The Art of Piggybacking

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

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


  • Mason Hawkins Boosts Stake in Consol Energy

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

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


  • Mason Hawkins Trims Position in Everest Re Group

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

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


  • Mason Hawkins Sells 3 Stakes in Portfolio

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

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


  • Longleaf Partners Comments on Mineral Resources

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


  • Longleaf Partners Comments on Genting Berhad

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


  • Longleaf Partners Comments on LafargeHolcim

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


  • Longleaf Partners Comments on CEMEX

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


  • Longleaf Partners Comments on EXOR

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


  • Longleaf Partners Comments on CK Hutchison

    Another top performer, 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 22% during 2015 when combined with Cheung Kong Property. The corporate transaction helped remove holding company discounts and clarify business line exposures by splitting the property business (Cheung Kong Property Holdings) from 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. In the fourth quarter, Cheung Kong Property was a modest detractor, down 10%, as poor sentiment towards real estate and China lowered real estate prices in Hong Kong. Hong Kong property stocks remained sharply discounted versus the physical property market. Cheung Kong, among the largest property companies in China and Hong Kong, has a large, low cost land bank in China and a strong balance sheet, positioning the company to exploit short-term market disruptions for the benefit of long-term investors. Chairman Li Ka-shing and his son, Victor Li, have demonstrated a track record of building businesses, compounding NAV at double-digit rates, and buying and selling assets at compelling values.


  • Longleaf Partners Comments on Colt Group

    Colt Group (COLT), the British- based provider of business communications and information technology solutions to companies primarily in Europe, was up 40% for the year, making it among the Fund’s largest contributors. We sold the position when the company was acquired by Fidelity Investments in the third quarter. Our investment in Colt, beginning in the second quarter of 2014, produced a 27% annualized return for the International Fund.


  • Longleaf Partners Comments on Baidu

    Baidu (NASDAQ:BIDU) was added to the portfolio in the second half during the China market panic, and the strong fourth quarter rebound, up 38%, resulted in the stock also being one of the strongest contributors for 2015. Baidu is the dominant internet search provider in China with 71% market share of PC and mobile search page view and revenue share over 80%. Its online search business grows at 30% per year with 50% operating margins and sells at a single-digit FCF (free cash flow) multiple. The company only focuses on Chinese language search, mastering the subtleties of its domestic market. During the fourth quarter, in the large and fast-growing online travel space, Baidu swapped its 45% stake in Qunar for a 25% stake in Ctrip. Together with Ctrip’s 37.6% stake in eLong, Ctrip will control 80% of online domestic travel booking revenues, which should lead to more rational competition and improved economics. Through this transaction, Baidu vastly improved its position to become the largest 020 (online to offline) travel platform in China. Furthermore, Baidu will de-consolidate loss making Qunar and provide more clarity to the underlying economics of the core search business. Separately, Alibaba’s offer to privatize online video company Youku Tudou during the quarter helped validate the conservatism in our appraisal of Baidu’s 80% stake in online video business iQiyi.


  • Longleaf Partners Comments on Adidas

    After announcing another strong quarter of double-digit organic growth for its core adidas (XTER:ADS) brand, German-based global sportswear and equipment brand adidas returned 22% in the quarter and 43% for the full year. The brand’s strong positions in Europe, China, and Latin America drove growth. The company expects 2016 operating income margins to meet or exceed 2015 levels and overall sales to increase at high, single-digit rates in the next year. Despite the stock’s strong performance, we believe adidas remains discounted due to strong value growth and has significant additional upside. As discussed in previous quarters, we have had constructive engagement with management and the supervisory board and have seen many positive developments. In addition to authorizing a 10% share repurchase program, the company made managerial changes in the U.S. business, sold its non-core Rockport brand at a price above our appraisal value, and announced it is exploring strategic options for its golfing brands and hockey division.


  • Longleaf Partners Comments on Melco

    As mentioned above, Macau casino and hotel operator Melco (NASDAQ:MPEL) gained 22% in the fourth quarter but remained among the Fund’s largest detractors for the year, down 31%. The stock benefited from improved sentiment regarding Macau during the quarter among indications that the higher margin mass market is stabilizing. In addition to relaxation of transit visa, the Macau government softened its stance on the smoking ban on the gaming floors. While Beijing will continue its anti-corruption campaign (which has hurt VIP business in Macau), the mass-focused infrastructure spending (high speed trains, ferry terminal, bridge from the HK airport, light rail) continues unabated. More than 90% of Melco Crown’s earnings before interest, taxes, depreciation and amortization (EBITDA) comes from mass business, where margins are 4X that of VIP business. Melco Crown opened its new mass-focused casino Studio City in late October, which helped increase market share in the all-important mass segment. This $3.2 billion project (relative to Melco’s market cap of $9 billion) has just started generating cash flow. We expect Studio City to receive an additional 50 table allocation in early 2016 in addition to its initial 200 table allocation. With a strong balance sheet, increasing EBITDA, and declining capital expenditure profile, the company is well positioned to buy back shares or buy out minority owners of Studio City. Melco International CEO, Lawrence Ho, bought about $25 million worth of shares in the fourth quarter.


  • Longleaf Partners Comments on BP Properties

    BR Properties (BSP:BRPR3) appreciated in local currency, but the weak Brazilian real made the company a substantial detractor in USD. Despite a strong rebound across our Macau gaming companies in the fourth quarter, Melco International remained a top detractor for the year. While we believe these portfolio exposures offer more substantial discounts and greater potential upside than the index, the negative performance masked the positive progress across the majority of our businesses in the year. Weak currencies and stocks that are substantially discounted can change direction quickly, and we believe these investments will ultimately provide solid returns.


  • Longleaf Partners Comments on Empire State Realty Trust

    In the last quarter we exited Empire State Realty Trust (NYSE:ESRT), which owns the Empire State Building as well as other properties in the New York metropolitan area. After making 44% in our two-plus year holding period, the price approached our appraised value. We are grateful to our partner, CEO Tony Malkin, and wish him continued success.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on Scripps Networks

    Another detractor for the year, media company Scripps Networks (NYSE:SNI), which owns cable channels including HGTV, The Food Network, DIY, Cooking, and the Travel Channel, declined to -25% in 2015 despite rising nearly 13% in the fourth quarter. Scripps fell sharply in the third quarter along with the rest of the media industry after Disney acknowledged ongoing challenges in the pay TV landscape, and many peers followed with disappointing ratings. Scripps, unlike most of its media peers, creates and owns valuable content that attracts a specific loyal, upscale audience. For this, Scripps channels receive an advertising premium versus other, less differentiated channels. Scripps also is underpaid by distributors for the ratings points it provides. The final difference versus peers is that Scripps is much earlier in its international expansion and therefore has money-losing yet valuable international properties not credited in a simple earnings multiple. During the year the company acquired TVN, a Polish media asset that has created confusion regarding Scripps’ international expansion plans. The company’s much larger free cash flow than reported earnings makes industry price-to-earnings (P/E) ratio comparisons somewhat meaningless.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on Triangle Petroleum

    Also previously mentioned, Triangle Petroleum (TPLM), a Bakken-focused E&P company with an internally developed oil services business (RockPile) and a joint-ventured pipeline business (Caliber), declined 62% for the year after falling 22% in the fourth quarter. Triangle’s integrated strategy provides a cost advantage in North Dakota where there is little infrastructure. Management has shown discipline in a challenged environment by announcing a 71% cut in capex without an offsetting production cut. Additionally, management bought shares personally and repurchased discounted debt at the company level. Late in the year, we swapped the common stock into bonds that were priced at a substantial discount to par, yielding 33% to maturity as of year end. This transaction provided a better risk-reward profile and offset some of the Fund’s realized gains.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on Graham Holdings

    A large detractor to the Fund’s performance in the fourth quarter, media and education company Graham Holdings’ (NYSE:GHC) 16% decline took its 2015 return to -11%. The stock price was impacted by broader weakness in the media industry and for-profit education where the regulatory and economic environment continued to be challenging. In the quarter, Graham Holdings’ Kaplan business reported worse U.S. student trends, and margins and revenue growth declined.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on HollyFrontier

    In the first quarter, amidst the market selloff of energy companies, we purchased HollyFrontier (NYSE:HFC), the independent petroleum refiner that owns and operates five U.S. refineries. The company owns plants in superior locations that allow for above-average margins. Additionally, management has a history of productive capital allocation. As a refiner, HollyFrontier benefits from the decline in energy prices which lead to more miles driven and increased demand for gasoline. During the year, CEO Mike Jennings bought in undervalued shares and focused on projects with master limited partnership (MLP) potential to cater to investors’ thirst for yield. This strategy, plus takeover speculation, helped the stock rise to our appraisal. HollyFrontier appreciated 55%, was among the year’s largest contributors to performance, and was sold in the third quarter.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on Vail Resorts

    Vail Resorts (NYSE:MTN), the largest owner of ski resorts in the world, gained 23% in the fourth quarter and 44% for the year, making it the Fund’s top contributor in 2015. So far in the 2015/2016 U.S. ski season, the company has posted strong pass sales (+13%), with price increases of 6% and higher units. With Vail’s strong financial position and positive operating cash flow (OCF), CEO Rob Katz reaffirmed the company’s plan to continue to return capital to shareholders via an increased dividend and share buybacks. The board recently authorized an additional 1.5 million shares for repurchase (roughly 4% of shares outstanding). Our appraisal of the company grew in the quarter and over the year.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


  • Longleaf Partners Comments on DreamWorks Animation

    A top contributor to the Fund, film studio DreamWorks Animation (NASDAQ:DWA) gained 16% for the year after a substantial 48% rise in the fourth quarter—an example of how quickly payoff patterns can move. The company had a box office success with the late March release of the movie Home, which continued to do well in home video and streaming. In December, DreamWorks announced a co-production deal with DHX Media, demonstrating that the company’s efforts to develop television content has progressed into recurring revenues. The New Media segment, which contains AwesomenessTV, had impressive revenue growth and margins. License renewals helped drive strong revenue and earnings growth in the consumer division. CEO Jeffrey Katzenberg’s push in the Chinese film distribution market via the 45% Oriental DreamWorks JV has potential for meaningful upside.

    From Longleaf Partners Small-Cap Fund Commentary for 4th quarter 2015.


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