Mason Hawkins is chairman and chief executive officer of Southeastern Asset Management Inc., an investment advisory firm with $34 billion in assets under management. At Southeastern, he and his team seek to achieve long-term absolute returns with minimum risk in their portfolio of 18-22 businesses, focused on their best ideas.
These are Southeastern’s long-term beliefs:
- Long-term investment horizon provides opportunity for "time horizon arbitrage."
- In-depth, conservative business appraisals underpin all decisions.
- Stock price volatility offers opportunity.
- Margin of safety determines entry and exit limits based on price-to-value ratio (P/V).
- "Cheap" is not enough – sustainable competitive advantages that lead to value growth are equally critical.
- Corporate management's capability, incentives, and business decisions greatly impact our outcome.
- Concentrating in the 18-22 most qualified opportunities adequately diversifies, reduces risk, and improves return.
- Bottom-up, benchmark agnostic portfolio construction enables superior returns by owning only the highest quality, most discounted businesses.
Mason aims for a target return each year of 10% or more plus inflation. Since inception, his fund has beat the S&P 500 1186.85% to 729.75%, but more recently lagged, losing 5.64% compared to a gain of 5.45% of the S&P 500 in the last year.
In addition, he uses a valuation metric called the “price-to-valuation” ratio to measure the value of a company compared to the price the market has placed on it.
Southeastern is the largest shareholder of Chesapeake Energy (CHK), the embattled energy company whose CEO drew criticism earlier this year for controversial business practices. Hawkins, along with investor Carl Icahn, have since pushed for and achieved significant changes at the company. They now believe that the company has the best board they have seen, along with the best physical assets they have owned, which makes them enthusiastic about keeping CHK as a core fund holding.
|Dell Inc. (DELL)|
|Chesapeake Energy (CHK)|
|Walt Disney (DIS)|
|Aon Plc (AON)|
|The Travelers Companies (TRV)|
|Level 3 Communications (LVLT)|
|Bank of New York Mellon (BK)|
Learn more about Mason and his views on the present economy in his second-quarter letter here. See his portfolio here.
To ask Mason your investing question, post it in the comments section below. We’ll be publishing the answers soon.