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.
