Reading the periodic reports of mutual funds that successfully implement strategies similar to your own can be a great source of investment information. I always enjoy reading the shareholder reports for the Longleaf Partners Fund (FUND: LLPFX). The fund has provided excellent historical returns, and its portfolio managers clearly and regularly discuss their philosophy, perspective, and portfolio moves with shareholders. As very patient, value-oriented investors, they have a strategy that encompasses many characteristics I incorporate into my own stock-picking. Given their clear communications and my close observation of them for more than a decade, it's pretty easy for me to understand what they're thinking.
The biggest news in the most recent annual report: After finding it difficult to put money to work for a couple of years -- cash reached 26% of assets at the end of 2004 because of a dearth of ideas -- the managers found sufficient investment opportunities to bring cash down to 0.5% at the end of 2005. This change doesn't necessarily mean that the overall stock market is cheap, but it does at least indicate that the market offers pockets of attractive valuations.
By Warren Gump
February 28, 2006