Mason Hawkins and his partners are value investors. When evaluating potential investments, they look for three things, good business, good people, and a good price. Like many successful gurus, he and his partners seek to achieve superior long-term performance by acquiring equity securities in understandable business with strong balance sheets, run by capable management, and trading at less than intrinsic value. Typically, they only invest in companies trading at 60% or less of intrinsic value appraised by looking at the current value of a company’s assets and liabilities and also by looking the present value of future cash flows (DCF).They sell stocks when the stocks reach their intrinsic worth. Mason Hawkins believes it is important to have a portfolio concentrated in only the best investment ideas, and the firm generally holds fewer than 25 stocks in each portfolio.
Longleaf Partners Fund Breakdown
|10-Year Avg Annual Rate of Returns|
|Partners Fund||85.8% Stock||4.76%|
|Partners Fund's Top Holdings||$7.92 Billion|
|Chesapeake Energy Corp||9.1%|
|DirectTV Group, Inc||9.1%|
|Small Cap Fund||98.4% Stock||7.42%|
|1.6% Cash/Asset||Small-Cap Top Holdings||$2.4 Billion|
|Fairfax Financial Holdings||8.9%|
|tw telecom inc||8.2%|
|The Washington Post||6.5%||Int'l Fund||95.2% Stock||7.27%|
|4.8% Cash/Asset||Int'l Top Holding||$2.2 Billion|
|Fairfax Financial Holdings||10%|
|NipponKoa Insurance Company||8%|
Berkshire Hathaway Inc. (BRK-A)Holding company Berkshire Hathaway Inc. owns subsidiaries engaged in diverse business activities. The most important of these are insurance businesses conducted nationwide on a primary basis and worldwide on a reinsurance basis. Berkshire Hathaway Inc. has a market cap of $103.06 billion; its shares were traded at around $97500 with a P/E ratio of 29.59 and P/S ratio of 0.96. Berkshire Hathaway Inc. had an annual average earning growth of 27.1% over the past 10 years.
Partners fund contains 3.6% or 2,863 shares of Berkshire Hathaway stock. According to Reuters GE directors have promised to repurchase the $3 billion of preferred shares the company sold to Warren Buffett's Berkshire Hathaway Inc. as soon as 2011. This week, shareholders approved a 50-for-1 split for Berkshire Hathaway class-B stock, while class-A remains untouched at $103,000 per share. Last year, Buffet bought the No. 2 railway operator Burlington Northern Santa Fe for $26.4 billion. According to NYT, Buffet believes that once the economy gets rolling, demands for goods rise, as will demands for train freighters. Also, this week Kraft’s bids for Cadbury continued after Buffet says “it’s a bad deal”. Berkshire is the top holder of Kraft, at 9.4% stake.
Mason Hawkins owns 5,801 shares as of September 2009, which accounts for 2.55% of the $22.99 billion portfolio of Southeastern Asset Management. Hawkins has bumped up his stake in Berkshire since 1Q of 2009 at 5,282 shares.
Symantec Corp. (SYMC)Internet security software company, Symantec Corp. has a market cap of $15.28 billion; its shares were traded at around $18.85 with a P/E ratio of 13.76 and P/S ratio of 2.48.
Symantec Corp. had an annual average earning growth of 20.6% over the past 10 years.
This March, Symantec Corp plans to purchase software security company Gideon Technologies, Inc. In a press release, Symantec reported 83.4% of last year’s Spam email came from botnets, and 16.6% or 900 million came from free-web-e-mails. The company wins $545 million in back-taxes they protested from the IRS. The tax error originated from acquisition of Veritas Software Corporation in 2005.
Mason Hawkins owns 31,110,648 shares as of 3Q 2009, which accounts for 2.23% of the $22.99 billion portfolio of Southeastern Asset Management. Hawkins has trimmed his stake in Symantec compared to 3Q of 2008 at 33.5 million shares.
FedEx Corp. (FDX)Global transporter FedEx Corporation has a market cap of $26.6 billion; its shares were traded at around $85.11 with a P/E ratio of 32.36 and P/S ratio of 0.75. The dividend yield of Fedex Corp. stocks is 0.52%. Fedex Corp. had an annual average earning growth of 17.7% over the past 10 years.
Partners fund contains 2.8% or 2.93 million shares of Fedex stock. The logistics company will increase freight fees by 5.9% starting February 2010. Fedex’s competitor UPS will begin lay-offs of 1,800 employees and raising their quarterly outlook. Fedex launches their international ad campaign, “Fedex delivers to change the world.” The shippers cool off from delivering holiday packages. Reports shows, Fedex shipped 14.1 million packages on Dec. 14 alone. It passed the 12 million package peak of 2007. Daily average shipment is 7.5 million packages.
Mason Hawkins owns 6,747,544 shares as 3Q, which accounts for 2.21% of the $22.99 billion portfolio. The price of the stock has increased by 25.11% since. Hawkins has cut Fedex holdings by half since 2008.
Fair Isaac Corp. (FICO)Credit score company Fair Isaac Corporation has a market cap of $1.04 billion; its shares were traded at around $22.06 with a P/E ratio of 15.43 and P/S ratio of 1.65. The dividend yield of Fair Isaac Corp. stocks is 0.36%. Fair Isaac Corp. had an annual average earning growth of 17.3% over the past 10 years.
The 3Q letter stated, “Fair Isaac appreciated 39% in the quarter. The company has generated meaningful free cash flow throughout the last year, and although revenues declined, operating income margins grew. Management reported an increase in the top line over last quarter in both their credit scoring and software businesses” (page 12).
Mason Hawkins owns 7,911,200 shares as of 3Q, an increase of 10.21% from the previous quarter. This position accounts for 0.74% of the $22.99 billion portfolio of Southeastern Asset Management.
DIRECTV Group Inc. The (DTV)Media and cable provider Directv Group Inc has a market cap of $31.88 billion; its shares were traded at around $33.32 with a P/E ratio of 26.03 and P/S ratio of 1.62. The company had an annual average earning growth of 12.7% over the past 10 years.
The company plans to provide 3-Dimensional media content to its subscribers using RealD technology, which have been used in movie theatres. The federal media regulators or FCC s cut out loopholes that allow cable television companies to withhold TV programming from competing providers. DirectTV will be merging with Liberty Media Entertainment Corp in the following quarter.
The Partners Fund has 14.3% of its holdings in two media & broadcasting companies: DIRECTV Group, Inc and Liberty Media Entertainment Corporation.
|DirectTV Group, Inc||64||723.8|
Hawkins wrote, “we trimmed two overweight positions Dell and Liberty Media Entertainment , as their prices rose… We reinvested some of the Liberty proceeds into DirecTV to maintain a combined position of roughly 15% in these two stocks, which should become a single company in the fourth quarter. The relationship between the price of DTV and LMDIA over the last year provides insight into how variably “Mr. Market” priced virtually the same asset. Liberty Media Entertainment owns just over half of DTV’s shares as well as several small assets, making the value of the two companies very close on a price per share basis. In November of 2008 DTV traded around $22 while LMDIA fell to around $11. The underlying assets did not change, and we exchanged half of our DTV position to overweight LMDIA. By May the trade paid handsomely. LMDIA rose above $25 and DTV sold for below $24. Because the stocks’ P/V ratios were similar, we equally weighted the positions. Since then, LMDIA has appreciated to over $30. We have trimmed the position and added some of the proceeds to DTV in the mid $20s. These portfolio changes reflect more trading than usual for Southeastern—we are long-term business owners. “Mr.Market,” however, has enabled us to own the same satellite television company through two different stocks at vastly different prices. Not surprisingly, LibertyMedia Entertainment has been the top contributor to the Partners Fund’s performance this year, gaining almost 80% in 2009 (page 4).”
Mason Hawkins owns 75,443,701 shares as of 3Q, an increase of 28.31% from the previous quarter. This position accounts for 9.05% of the $22.99 billion portfolio of Southeastern Asset Management. Multimedia
Long Leaf Partners Fund