Mason Hawkins (Trades, Portfolio) has been the chairman and CEO of Southeastern Asset Management since 1975. The firm is a value investment firm and looks for three things in a business: good business, good people and a good price. He seeks to invest in businesses that are easily understandable, have strong balance sheets, are run by capable and shareholder friendly management, and trading at less than intrinsic value. The company will ascertain the intrinsic value of the business by looking at the asset value of the business or calculating the present value of future free cash flow. He is a very concentrated investor, normally holding less than 25 stocks in a portfolio at any given time.
Here are three companies from the portfolio that we find interesting at current levels:
Loews Corp. (L, Financial) – Forward P/E of 14.39, P/TBV of 0.75, EV/EBIT of 14.45
Loews is a holding company owned and managed by the Tisch family. The company engages in commercial property and casualty insurance, operation of offshore oil and gas drilling rigs, exploration, production, and marketing of natural gas and oil, operation of interstate natural gas pipeline systems and the operation of hotels. The company’s shares are down 20% from the highs in late 2013 and trade at $38.40 per share (near 52-week lows).
In its most recent fiscal quarter, Loews reported revenue of $3.16 billion, compared to $3.59 billion in the same quarter a year ago. Net earnings were $182 million (50 cents per share diluted) compared to $208 million (55 cents per diluted share) in the same periods.
The numbers came in lower than expected with revenues declining ~8% year-over-year because of lower insurance premiums, investment income and contract drilling fees. The company continues to maintain a strong balance sheet with ~$41 billion in cash reserves.
Shares look appealing at current levels with a forward P/E of 14.39, P/TBV of 0.75, and EV/EBIT of 14.45.
Scripps Networks (SNI, Financial) – Forward P/E of 12.29, FCF yield of 10.35%, EV/EBIT of 10.29, and dividend yield of 1.56%
Scripps develops lifestyle oriented content for television and the internet. Their brands include the Food Network, Home and Garden Television, Travel Channel, Cooking Channel, DIY Network, and Great American Country. The company’s shares are down over 32% over since the highs of late 2013 and trade at $59.00 per share.
In its most recent fiscal quarter, Scripps reported revenue of $776 million, compared to $644 million in the same quarter a year ago. Net earnings were $125 million (96 cents per share diluted) compared to $131 million (93 cents per diluted share) in the same periods.
Earnings came in better than expected and as a result of network affiliate fees and rate increases. Many of the network cable operators have had a difficult time navigating the dynamic entertainment industry. Regardless, the company has still been able to generate excess free cash in the $700 million to $800 million range. In addition, the company continues to buy back shares at an incredible rate. Shares outstanding have decreased 8.80% the last 12 months.
Shares look appealing at current levels with a forward P/E of 12.29, FCF yield of 10.35%, EV/EBIT of 10.29, and dividend yield of 1.56%.
Everest Re (RE, Financial) – P/E of 8.87, EV/EBIT of 5.53, and dividend yield of 2.14%
Everest Re provides property and casualty reinsurance and insurance products and services in the U.S., Bermuda, and international markets. They operate in five segments: U.S. Reinsurance, U.S. Insurance, International, Bermuda, and Mt. Logan Re. The company’s shares have risen consistently since the lows of 2009 and trade at $186.90 per share (near all-time highs).
For its most recent fiscal quarter, Everest reported revenue of $1.37 billion, compared to $1.53 billion in the same quarter a year ago. Net earnings were $89 billion ($2.00 per share diluted) compared to $275 billion ($6.00 per diluted share) in the same periods.
The most recent quarter saw a setback with operations in the reinsurance markets leading to earning declining 7% year-over-year. Premiums written and investment income both dropped in the quarter as underwriting results were worse than expected. Insurance markets continue to remain soft. The company is making a concerted effort to diversify into the primary insurance market. They’ll do this through new hires, new distribution, new products, and expansion into other geographic areas. And we would not be surprised to see the company become more proactive in M&A.
Shares look appealing at current levels with a P/E of 8.87, EV/EBIT of 5.53, and dividend yield of 2.14%.
