Mason Hawkins

Mason Hawkins

Last Update: 10-17-2017

Number of Stocks: 29
Number of New Stocks: 3

Total Value: $9,109 Mil
Q/Q Turnover: 2%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Mason Hawkins Watch

  • Longleaf Partners Comments on Alphabet

    Alphabet (NASDAQ:GOOGL), (+10%; +0.74%), the diversified internet company with strong positions worldwide in search (Google), video (YouTube), mobile (Android) and more, was another contributor in the quarter. Revenue growth accelerated, and margins were better than expected. The company bought back shares and continued to simplify its Other Bets segment while growing its lead in driverless cars. The $2.7 billion European Union (EU) fine levied at the end of the quarter was a negative, but it remains to be seen exactly how the EU ruling will play out. Alphabet has been one of Southeastern’s best value-growers in recent years. While we trimmed the position slightly, we believe that the company’s core business growth will continue, YouTube and Other Bets offer additional harder-to-quantify upside, and the strong balance sheet with substantial cash provides attractive downside mitigation.


    From Longleaf Partners Fund second quarter 2017 shareholder letter.

      


  • Longleaf Partners Comments on Cheung Kong Property

    Cheung Kong Property (HKSE:01113) (+19%; +0.86%), the Hong Kong and China real estate company, was another notable contributor. The company achieved strong volumes of residential property sales in both countries. In the first half of 2017, Cheung Kong Property was the largest seller of residential property in Hong Kong. Additionally, the value of Cheung Kong Property’s commercial Hong Kong properties was highlighted with the sale by the government of the comparable Murray Road property across from Cheung Kong Property’s Hutchison House. The transaction fetched a land premium that implied a price of HK$50k per square foot (psf) on a gross floor area (GFA) basis and a cap rate of less than 3%. Our appraisal of Hutchison House is around HK$16k psf, which reflects the 5% cap rate we use to appraise Cheung Kong Property’s office properties in Central, Hong Kong. Cheung Kong Property will begin redevelopment of Hutchison House which will allow the company to substantially increase the plot ratio from the current 22 story building to 38 floors. Managing Director Victor Li built value on two fronts by selling residential properties into a high price/high demand market and aggressively buying in Cheung Kong Property’s undervalued stock. YTD, Cheung Kong Property paid HK$6.9 billion to repurchase ~3.3% of outstanding shares at a substantial discount to our appraisal. In May the company closed its acquisition of Duet in Australia. In the same month, Cheung Kong Property took advantage of the low interest rate environment and issued US$1.5 billion 4.6% guaranteed senior perpetual capital securities, which are being used to repurchase additional shares.


    From Longleaf Partners Fund second quarter 2017 shareholder letter.

      


  • Longleaf Partners Comments on CNH Industrial

    CNH Industrial (NYSE:CNHI) (+19%; +0.92%), the maker of agricultural equipment, commercial vehicles and construction equipment, contributed again in the quarter. The core agricultural business reported its best results since 2013. This segment continued to see unit demand stabilize, and pricing power remained intact. The company expects margins to improve at all segments this year. The best news during the quarter was the earlier-than-expected upgrade of CNH to investment grade status, which is more meaningful for this company than most others we follow. The upgrade will increase the efficiency of the financing business while likely freeing up over $1 billion of now excess capital for more productive uses, including share repurchase. We are thankful for CEO Rich Tobin’s efforts on the operational front and believe that he will work with CNH’s significant owners at EXOR to continue to build value per share.


    From Longleaf Partners' 2nd quarter 2017 shareholder letter.

      


  • Longleaf Partners Comments on FedEx

    FedEx (NYSE:FDX) (+12%; +1.00%), one of the world’s largest package delivery networks, contributed in the quarter. The company continued its excellent earnings momentum, driven currently by revenue strength and margin gains in the Express segment. The Ground segment revenues stayed incredibly strong, although margins were down as the company invested heavily in growth. We believe that the company is close to a point where Ground margins turn around and begin to grow as the large scale investment in new hubs slows. The company also communicated that the integration of its TNT acquisition from last year is going well, providing future earnings upside even though for now, TNT results are dilutive. Some of the investor panic around Amazon hurting FedEx as a competitor has also begun to subside, for logical reasons related to FedEx’s physical scale and last mile density. FedEx is heavily weighted as the Fund’s second largest position, reflecting our confidence in CEO Fred Smith and his team, as well as in FedEx’s competitive strength and long-term value growth. We did trim our stake in the quarter, however, following the stock’s appreciation.


    From Longleaf Partners' 2nd quarter 2017 shareholder letter.

      


  • Longleaf Partners Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+17%; +1.04%), the luxury gaming and hotel operator with prime properties in Las Vegas, Macau, and Boston, was the largest contributor this quarter, as it was in the first quarter. As Macau’s rebound accelerated, Wynn’s Palace property continued to ramp up strongly without cannibalizing the company’s legacy Peninsula property nearly as much as the market previously feared. Wynn reported a solid quarter in Las Vegas and announced that phase one of its golf course redevelopment will be a much more prudent project than some had anticipated, once again illustrating the great partner CEO Steve Wynn has been since we invested. Construction is on track for the Boston property to open in 2019. Our appraisal grew in the quarter, but we trimmed the stock to a more normal weight as the gap between price and value narrowed


    From Longleaf Partners' 2nd quarter 2017 shareholder letter.

      


  • Longleaf Partners Fund 2nd Quarter 2017 Fund Commentary

    Longleaf Partners Fund gained 3.91% in the second quarter, exceeding both our absolute return goal of inflation plus 10% and the S&P 500 Index’s 3.09%. These returns built on our strong results in 2016. Our year-to-date (YTD) return of 7.97% meaningfully exceeded our absolute goal but fell short of the index’s 9.34% largely due to our cash position’s impact. Much like the first quarter, performance was driven by positive returns and notable value growth at some of the portfolio’s larger holdings. Our two energy companies were the primary detractors in the quarter. We closed the Fund to new investors on June 9, as we have done three other times in our history. While this is a comment on the relative lack of new ideas and higher-than-usual cash levels, we remain confident we can produce positive absolute and relative returns over the next 3-5 years.


    The Fund’s outperformance is notable given our high cash weight and minimal exposure to what drove the index — a reminder that successful stock selection in a concentrated portfolio with high Active Share is a winning formula. Health Care and Information Technology were the largest contributors to the index performance by a wide margin, even after Technology’s retreat at the end of the period. The Fund had limited Information Technology investments and no Health Care, as we feel that the vast majority of companies in these two sectors, which make up over 35% of the S&P 500, are exhibiting dangerous signs of overvaluation. While cash held back the Fund’s return, we feel that this bottom-up decision and long-held discipline will benefit the portfolio as we find new qualifying investment opportunities, either through individual company mispricing or when broader market sentiment turns.

      


  • Longleaf Partners Funds Shareholder Letter 2nd Quarter 2017

    All four Longleaf Partners Funds continued to generate positive absolute returns in the second quarter with our gaming related investments meaningfully contributing and helping drive year-to-date (YTD) results ahead of our inflation plus 10% goal, with the exception of the Small-Cap Fund. The Global and International Funds also outperformed their benchmark indices by a wide margin in both the quarter and YTD with particular strength from Asian holdings. Cash was a notable drag on the Funds’ relative performance given the positive returns of the indices. Cash is a temporary by-product of our investment discipline and gives us liquidity to take advantage of new opportunities. The Funds’ performance results are even more impressive when adjusting for risk because we generated the returns with a notable cash weighting that was not susceptible to capital loss.


    We have delivered substantial absolute returns over the past 12 months, and we believe we can continue to generate good results because our companies have the potential to compound their values above our 8-9% discount rates over the next 3-5 years. Our confidence is based on the following:

      


  • With Oil Prices Cratering, Value Gurus Bet the Most on These Energy Stocks

    Mason Hawkins (Trades, Portfolio) sold Chesapeake Energy (NYSE:CHK) and Prem Watsa (Trades, Portfolio) reduced Exco Resources (NYSE:XCO) in the last week, stocks crushed by oil prices that continue to languish at their lowest prices since spring of 2016. For investors hanging on for something to change in energy, certain stocks hold more attraction than others.


    The energy sector is the worst-performing year to date. In stark contrast to all other S&P 500 sectors in the green, the energy index has dropped 12.8%. Oil prices experienced a hope-giving one-year crest entering 2017, but dipped this week to their lowest since March 2016, at $44.73 per barrel of WTI Crude Friday. The dive came despite OPEC’s pledge in May to cut production by 1.8 million barrels per day to offset chronic oversupply.

      


  • Mason Hawkins Buys Consol Energy, Viasat, Sonic

    Mason Hawkins (Trades, Portfolio) has been chairman and CEO of Southeastern Asset Management since 1975, and he and his partners manage the Longleaf Partners Funds. He manages a portfolio composed of 92 stocks with a total value of $9.839 billion. During the first quarter the guru bought shares in the following stocks:


    The stake in Consol Energy Inc. (CNX) was raised by 12.47% with an impact of 0.95% on the portfolio.

      


  • Bill Nygren Gains 3 Holdings, Divests 2 Others in 1st Quarter

    Oakmark Funds’ Bill Nygren (Trades, Portfolio) established three positions and sold two others during the first quarter.


    A patient investor, Nygren invests in companies that are trading at a discount with the belief the stock price will climb higher to reflect the underlying business’ value. During the quarter, he established stakes in Delphi Automotive PLC (NYSE:DLPH), Chesapeake Energy Corp. (NYSE:CHK) and Moody’s Corp. (NYSE:MCO).

      


  • Longleaf Partners Small Cap Fund Comments on Rayonier

    We also sold timber REIT Rayonier (NYSE:RYAM) late in the quarter after the company issued equity at a price that reinforced our assessment that the stock was at or near fair value. Over the three years we held the stock, a challenging timber environment hindered value growth, and while the discount we paid plus the dividend helped preserve our capital, our 12% total return was less than we anticipated.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Tribune

    Our second time owning media company Tribune (NYSE:TRCO) was not nearly as gratifying as our first successful investment in the company’s bonds as it came out of bankruptcy. This time, our value declined due to disappointing results at the TV division, a weak spectrum auction, and a lack of value growth from other assets. Our small positive return amid these disappointments speaks to the margin of safety in our initial purchase.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Graham Holdings

    Graham Holdings (NYSE:GHC) (+17%; +0.95%), the media, education, and services company, was another contributor in the quarter. The Kaplan International segment reported relatively good results for the first time since 2015 and showed signs of having bottomed out as cost cuts should kick in this year. Graham’s TV segment continued to deliver industry-leading results, and the market began to anticipate TV consolidation opportunities under a less regulatory administration. We applaud CEO Tim O’Shaughnessy for buying back a meaningful amount of stock at discounted prices last year, and we are excited about his ability to go on offense with Graham’s formidable balance sheet.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners Small Cap Fund Comments on Wynn Resorts

    Wynn Resorts (NASDAQ:WYNN) (+33%, +1.78%), the luxury gaming and hotel operator with prime properties in Las Vegas, Macau, and Boston, was the largest contributor in the quarter. Macau’s rebound continued, as that market now has grown for several months, some at double-digit rates. Wynn’s Palace property is ramping up from non-earning status more quickly than expected and gaining share as the premium property in Macau. Las Vegas continues to be a steady market, and the company is making progress on developing and monetizing its under earning golf course land. Wynn also is likely to benefit from the NFL coming to Las Vegas. Construction on the Boston resort is moving ahead as planned. Wynn has a large amount of optionality, and we are confident that CEO Steve Wynn and his team can maximize our outcome. Given the price strength and the position size, we trimmed the stock in the quarter.


    From Longleaf Partners first quarter 2017 Small-Cap Fund Commentary.

      


  • Longleaf Partners First Quarter 2017 Small-Cap Fund Commentary

    Longleaf Partners Small-Cap Fund gained 3.93% in the first quarter and outperformed the Russell 2000 Index’s 2.47%. Our absolute return surpassed our annual absolute goal of inflation plus 10%, continuing the strong performance from 2016. We exceeded the market’s return thanks to strong performance from key holdings and pullbacks from some of the “Trump rally” highfliers that we did not own.

      


  • Longleaf Partners Comments on DuPont

    In addition to selling Ralph Lauren, we also exited DuPont (NYSE:DFT) in the quarter. We earned a 60% gain in DuPont when price reached our appraisal. We bought the stock in August 2015 when questions surrounded both the business quality and management, but we believed the board, which was under shareholder pressure, would address the company’s leadership, cost structure, and capital allocation to help the conglomerate focus on its more dominant, growing segments. The businesses performed solidly, and the arrival of CEO Ed Breen with his cost cutting plans and smart merger with Dow turned the investment into a success. We will continue to watch the company and its spinoffs going forward.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on Ralph Lauren

    Ralph Lauren (NYSE:RL), (-15%; -0.62%), the upscale retail brand, declined following the departure of CEO Stefan Larsson after less than two years at the helm. Our case was built on the potential for Larsson and Lauren to form a complimentary business and creative team, and the early results were promising as they cut costs and rationalized unnecessary stock keeping units. But when these two leaders were not able to coexist, a big part of our case changed. Rather than wait to see if the operating plan could continue without Larsson’s guidance, we sold our position. The disappointing outcome had only a minor impact on our return during our seven month investment period because of the operating progress the company made in a short period and because we have begun sizing new investments at less than a full 5% position while we gain more in-depth knowledge of the business and people as an owner.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on Chesapeake Energy

    Chesapeake Energy (NYSE:CHK) (-15%; -0.70%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the largest detractor in the quarter. At the macro level, declines in oil and gas prices pressured the stock. We use the futures strip for both commodities in our appraisal of Chesapeake, even though they are currently trading below the global energy industry’s long run marginal costs. CEO Doug Lawler further improved the company’s financial strength and flexibility, closing two Haynesville deals and reporting another solid operational quarter. We believe he and his team will continue to execute additional asset sales and maintain both operating and capital expense discipline.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on LafargeHolcim

    LafargeHolcim (LHN) (+13%; +0.60%), the world’s largest global cement, aggregates, and ready-mix concrete producer, also added to the Fund’s return. The company’s 4Q results demonstrated continued success in pricing, operating cost control, and disciplined capital spending which helped earnings before interest, tax, depreciation and amortization (EBITDA) grow 15.5% and free cash flow increase 107%. For 2017, Eric Olsen guided to 2-4% volume growth helped by resumed growth in India and Latin America and continued volume growth in the U.S. Improved volumes combined with pricing and cost controls should drive double-digit EBITDA growth and strong free cash flow (FCF) generation. FCF along with divestitures has fortified LafargeHolcim’s balance sheet, and the competitive landscape is positive with few slated capacity additions. We expect dividends and share repurchases to accelerate as cash flow grows.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


  • Longleaf Partners Comments on CNH Industrial

    CNH Industrial (NYSE:CNHI) (+11%; +0.61%), the maker of agricultural equipment, commercial vehicles and construction equipment, was another contributor in the quarter. The company once again reported higher pricing in the core agricultural equipment segment at a time of down units. We applaud CEO Rich Tobin for good cost controls, as margins came in better than we expected. There are early signs that the agricultural market is stabilizing after years of decline. When demand for equipment turns, the company’s strong incremental margins will be working in our favor. We believe that management and the board are open to further rationalizing the company’s assets, as our vested partners, large owner John Elkann and Chairman Sergio Marchionne, have done at other investments in the past.


    From Longleaf Partners Fund first quarter 2017 commentary.

      


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