In terms of individual portfolio weightings, the largest percentage increase during the quarter was Houghton Mifflin (NASDAQ:HMHC), which more than doubled in size from a little over 1% at the end of the first quarter to roughly 2.5% by the end of June. HMHC declined nearly 22% in the quarter to $15.63, due primarily to concerns about how fast school districts would adopt new K-12 learning material and what the company’s “win rate” would be in the states awarding new contracts. We believe the stock has been overly discounted on these concerns and, trading at less than 10x free cash flow, represents a compelling value.
From FPA Capital Fund (Trades, Portfolio)'s second quarter 2016 commentary.
