Liberty Interactive and Liberty Capital both have further upside potential. Interactive owns QVC which continues to grow while generating prodigious amounts of free cash flow. Very little of the cash is needed in the business so most of it can be redeployed by John Malone to acquire complementary businesses or to buy back stock. Capital sells at a substantial discount to the underlying value of its (mostly passive) assets, and we believe Malone should be able to both grow the net asset value of the company and shrink the discount at which the stock sells.
Going forward, all of these stocks remain important holdings. Countrywide seems especially attractive at 7-8 times expected 2007 earnings per share. Fannie Mae is gradually emerging from the clouds of accounting scandal and political debate over its future and we believe it has room for further gains. Berkshire Hathaway has been strong lately, but it still has huge cash reserves that we expect to see deployed more profitably through acquisitions of entire businesses and/or securities.
Comcast is approaching our estimate of intrinsic value and we have trimmed our positions, but we believe it still has considerable growth ahead of it. Other major holdings such as Wal-Mart, UnitedHealth, AIG and Redwood Trust are still very attractive long-term investments, and several smaller companies have important roles, especially in the smaller funds—Hickory and Partners III. The tables on the "Portfolio Profile" page for each Fund show top-ten holdings, largest net purchases and sales, and net contributions to results (positive and negative) during the last quarter. Most of the buying and selling represented adding to favorite positions on weakness and trimming holdings of strong performers whose position sizes increased as their price-to-value relationships became less attractive.