Mason Hawkins 13D Buys and Sells
Mason Hawkins has been the chairman and CEO of Southeastern Asset Management since 1975. He and his partners manage the Longleaf Partners Funds. Like most value investors, Hawkins aims for superior performance by acquiring securities with understandable business, strong balance sheets and capable management. He limits his investments to companies trading at 60% or less of intrinsic value. When he believes a stock has reached its intrinsic worth, he sells.
Texas Industries Inc. (TXI)
Texas Industries Inc. is a supplier of construction materials through two business segments: cement, aggregate and concrete products; and structural steel and specialty bar products. Texas Industries Inc. has a market cap of $1.1 billion; its shares were traded at around $39.62 with and P/S ratio of 1.8. The dividend yield of Texas Industries Inc. stocks is 0.8%.
Texas Industries is a very long term investment for Hawkins – he has held the stock since at least the third quarter of 2006, when he bought 3,291,4000 shares at an average price of $48.76 per share. He acquired more in the first, third and fourth quarters of 2010 when the price was in the $30 range. The stock price has risen 24% over the last year and fallen 13% year to date. As of Tuesday, it is $39.85 per share.
Hawkins added 11.07% of Texas Industries on June 6, 2011, and 3.74% on May 26, 2011.
The company posted negative free cash flow for four years prior to 2010, when it posted $56.1 million in free cash flow. It also posted negative free cash flow in the last four quarters. It has $74.9 million of cash on its balance sheet, and total long-term liabilities and debt of about $660 million. Earnings per share was negative for the last two years.
Total sales for the period ended February 28, 2011 increased to $24.9 million compared to $29 million the same period last year. Stone, sand and gravel sales increased $3.4 million due to 27% higher shipments and 3% lower average prices. The company was negatively affected by inclement weather in the quarter.
TXI is currently constructing a new cement plant expansion in central Texas. It also just hired a new vice president and COO to “support the implementation of its long-term strategy.”
In the first quarter of 2011, four other gurus held this stock.
DirecTV is a provider of digital multichannel television entertainment in the United States and Latin America. DirecTV has a market cap of $36.54 billion; its shares were traded at around $47.59 with a P/E ratio of 17.6 and P/S ratio of 1.5. DirecTV had an annual average earnings growth of 34.7% over the past 10 years.
DirecTV has been an extremely well-performing stock – it has risen 167% over the last five years and 20% year to date. Hawkins has owned the stock since at least the second quarter of 2006, when it traded for just $16.95 per share. Since then, it has risen to $47 per share. He owns 46,851,589 shares as of March 31, 2011, and reduced his position by 22.14% on May 10, 2011.
Hawkins has been selling chunks of DirecTV stock every quarter since the first of 2010, suggesting that he may believe the stock has reached its intrinsic value.
In 2010, it generated $2.8 billion in free cash flow, its 10-year record. It has long-term liabilities and debt of $18 billion and $1 billion of cash on its balance sheet. Earnings per share was also at a 10-year high of $2.6, though book value per share fell significantly from $3.04 in 2009 to negative $0.23 per share.
DirecTV is made up of two operating units – DirecTV US and Latin America, as well as DirecTV Regional Sports Networks. In June, DirecTV Latin America gained its 10 millionth customer. The company does not pay dividends.
In a 2011 interview with GuruFocus, Hawkins said that DirecTV is a “large position that has shown through good times and bad times that it has pricing power. It is getting 4% pricing increases right now. If inflation goes to 8.5%, their prices likely would go up 8.5%.
Worthington Industries Inc. (WOR)
Worthington Industries is a diversified metal processing companies. Worthington Industries Inc. has a market cap of $1.5 billion; its shares were traded at around $20.23 with a P/E ratio of 15.9 and P/S ratio of 0.8. The dividend yield of Worthington Industries Inc. stocks is 2%.
Hawkins owned 6,684,400 shares of Worthington as of March 31, 2011. On May 10, he sold out of his position and now owns zero shares.
Worthington’s stock price has risen 57.3% in the last year, and 10.6% year to date. In 2010 Worthington earned $45 million in net income, recovering from a $108 million loss in 2009. The company increased sales to $569 million in the quarter ended Feb. 28, 2011, from $451 million the same quarter the previous year.
Steel prices have been falling this year and experts forecast they will remain relatively flat for the rest of the year. Worthington is trying to boost profits by moving into China via a joint venture with Hubei Modern Urban Construction and Development Group Co. to manufacture steel framing products and to create steel-framed mid-rise residential buildings, which it will market to China’s growing middle-class population.
Additionally, the company plans to focus on acquisitions in the near future and has already acquired a 60% interest in an Indian manufacturer of steel cylinders for natural gas storage. It formed two other joint ventures in the first quarter.
Fair Isaac Corporation (FICO)
Fair Isaac Corporation makes decisions smarter. The company's solutions and technologies for Enterprise Decision Management give businesses the power to automate more processes, and apply more intelligence to every customer interaction. Fair Isaac Corporation has a market cap of $1.14 billion; its shares were traded at around $28.6 with a P/E ratio of 17.9 and P/S ratio of 1.9. The dividend yield of Fair Isaac Corporation stocks is 0.3%. Fair Isaac Corporation had an annual average earnings growth of 5.5% over the past 10 years.
Fair Isaac’s share price has risen 34% over the last year and 21% year to date. Hawkins has made a sizable profit from the holding – he bought 1,580,378 shares in the fourth quarter 2009 at $20.17 per share and has been selling almost every quarter as the stock price has risen. On May 10, he sold 1,173,865 shares at $26.57 per share.
In 2010 Fair Isaac generated $88 million in free cash flow, its lowest since 2002. Net income declined as well to $64.45 million in 2010 from $65.10 million in 2009, though gross profit margins were at their highest levels in 10 years at 70%.
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