Tracking Mason Hawkins' Southeastern Asset Management Portfolio - Q4 2015 Update

| About: Longleaf Partners (LLPFX)

Summary

Mason Hawkins’ 13F portfolio decreased from $11.85B to $11.08B this quarter. The number of positions decreased from 31 to 29.

Southeastern Asset Management substantially increased National-Oilwell Varco and United Technologies while reducing McDonald’s and dropping Loews.

The top-three positions are Level 3 Communications, Alphabet Inc., and Fedex Corporation and they add up to around 33% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Mason Hawkins' US stock portfolio on a quarterly basis. It is based on Hawkins' regulatory 13F Form filed on 02/12/2016. Please visit our Tracking Mason Hawkins' Southeastern Asset Management Portfolio series to get an idea of his investment philosophy and our previous update for the fund's moves during Q3 2015.

This quarter, Hawkins' US long portfolio decreased 6.49% from $11.85B to $11.08B. The number of holdings in the portfolio decreased from 31 to 29. The top three holdings are at 32.70% while the top five holdings are at 47.06% of the US long assets. The largest holding by far is Level 3 Communications which has been in the portfolio since 2003 and now accounts for 16.16% of the US long portfolio.

Southeastern is best known for its investor friendly attributes. The mutual funds in the Longleaf family are Longleaf Partners Fund (MUTF:LLPFX) incepted in 1987, Longleaf Small-Cap Fund (MUTF:LLSCX) incepted in 1989, Longleaf International Fund (MUTF:LLINX) incepted in 1998, and the Longleaf Global Fund (MUTF:LLGLX) incepted in 2012. Although these mutual funds are well known among retail investors, it should be noted that the vast majority of Southeastern's AUM is attributable to separately managed accounts. The characteristics that make the fund family distinct are elaborated in Chapter 10 of David Swensen's (Yale Endowment) book "Unconventional Success: A Fundamental Approach to Personal Investment".

Stake Disposals:

Empire State Realty Trust (NYSE:ESRT): ESRT is a very small 0.54% of the portfolio stake established in Q4 2013 soon after its IPO. The firm started trading at around $13 per share in October 2013. The original stake was kept steady until Q4 2014 when the position was sold down by ~19% at prices between $14.89 and $17.88. The selling accelerated in Q1 2015: ~56% reduction at prices between $17.41 and $18.96. The elimination this quarter happened at prices between $17 and $18.53. The stock currently trades at $14.88.

Loews Corporation (NYSE:L): L stake was established in 2010 in the high-20s price-range. There was a substantial stake increase in 2011 in the high-30s as well. The five quarters through Q2 2015 had seen a combined ~20% reduction at prices between $38.26 and $44.41 and that was followed with another one-third reduction last quarter at prices between $35.36 and $39.17. The position was sold out this quarter at prices between $35.37 and $38.80. The stock currently trades at $35.86.

Murphy Oil Corporation (NYSE:MUR): MUR was a small 1.37% of the portfolio position as of last quarter. It was eliminated this quarter at prices between $22 and $31. The stock currently trades at $16.79. Q3 2015 had also seen a ~55% reduction at prices between $23.76 and $41.57.

New Stakes:

None.

Stake Decreases:

Aon plc (NYSE:AON): AON is a fairly large 6.04% of the US long portfolio stake. It was first purchased in 2008 and by 2010 the stake was at over 23M shares at a cost-basis in the high-30s. More than half the position was sold in 2013 realizing huge long-term gains. The five quarters through Q1 2015 had also seen an additional ~25% reduction at prices between $80 and $100. The stake saw a ~47% increase in Q2 2015 at prices between $96 and $103. Last quarter saw an about turn as the stake was reduced by ~16% at prices between $88 and $103 and that was followed with a ~21% reduction this quarter at prices between $88.56 and $96.92. It currently trades at $93.80.

Chemtura Corporation (NYSE:CHMT): CHMT is a small 1.06% of the portfolio stake established in Q4 2014 at prices between $21.71 and $24.94. It was increased by ~17% the following quarter at prices between $21.52 and $26.85. This quarter saw a ~11% trimming. The stock currently trades at $25.81.

Note 1: Hawkins controls ~6.4% of the business.

Note 2: Chemtura's CEO Craig Rogerson commented in June 2015 that compared to making a large acquisition, it is more likely for the business to get sold.

Chesapeake Energy (NYSE:CHK): CHK is a 2.26% of the US long portfolio stake. It is a very long-term position first purchased in 2006. The original stake was built up to a huge ~87M share position (~13% of the business) by 2011 at a cost-basis in the 30s. 2013 saw a reduction to ~69M shares in the mid-20s price-range. 2014 saw a minor increase while there was a combined ~25% reduction in 2015 at prices between $4.50 and $21. The stock is now at $1.60. Hawkins realized long-term capital losses from this position.

Note: Southeastern also has positions in Chesapeake's convertible bonds, convertible preferred stocks, and call options. The latest regulatory 13G/A filing show them owning 89.57M shares (13.1% of the business). This is compared to 55.67M shares in the 13F.

Consol Energy (NYSE:CNX): CNX is a 3.28% of the 13F portfolio stake. The original position is from 2012 when ~25M shares were purchased in the low-30s. Q4 2014 & Q1 2015 saw a stake doubling at prices between $27 and $42. Last three quarters have seen only minor adjustments. The stock currently trades at $7.78.

Note: A regulatory 13D/A filing on 01/06/2016 show them owning 52.84M shares (23.1% of the business). This is compared to 46M shares in the 13F.

Dream Works Animation (NASDAQ:DWA): DWA is a medium-sized 3.75% portfolio stake first purchased in Q3 2014 at prices between $20 and $25. The original stake was more than tripled over Q4 2014 & Q1 2015 at prices between $18.57 and $27.27. Last three quarters have seen only marginal activity. The stock currently trades at $20.85. For investors attempting to follow Southeastern, DWA is a good option to consider for further research.

Note: Hawkins controls 20.4% of the business.

E I du Pont de Nemours (NYSE:DD): DD is a medium-sized 3.98% of the portfolio stake established last quarter at prices between $47.32 and $63.95. The stock currently trades at $58.39. This quarter saw a ~15% trimming.

Note: In December 2015, Dow Chemical (NYSE:DOW) and DuPont announced a merger of equals with plans to separate into three businesses after the merger.

Everest Re Group (NYSE:RE): RE is a very long-term stake that has been in the portfolio since 2004. Currently, it is a medium-sized stake at 3.68% of the portfolio. 2015 saw a combined ~37% reduction at prices between $169 and $190. The stock currently trades at $186.

Note: Hawkins controls 5.2% of Everest RE Group.

FedEx Corporation (NYSE:FDX): FDX is a very long-term position that has been in the portfolio since 2000. Currently, it is the third-largest position at 8.25% of the portfolio. Last quarter saw a ~24% increase at prices between $141 and $172. The stock currently trades at $129. There was a ~5% trimming this quarter.

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a top-three 8.29% position purchased in Q1 2015 at prices between $492 and $575 and increased by ~48% the following quarter at prices between $520 and $565. The stock currently trades at $682. Last two quarters saw a combined ~12% trimming.

Level 3 Communications (NYSE:LVLT): LVLT is Longleaf's largest 13F position at 16.16% of the portfolio. It is a very long-term stake that was first purchased in 2003 and every year through 2014 had seen a stake increase. The last major buying was in Q4 2014 when there was a ~21% increase at prices between $38 and $50. 2015 saw an about turn: ~40% reduction at prices between $43 and $57. The stock currently trades at $46.66.

Note 1: Southeastern controls 9.2% of LVLT.

Note 2: At the Invest for Kids conference in November 2014, Hawkins presented Level 3 as his investment idea and put a value of $61 per share. The stock was trading at around $46 at the time.

McDonald's Corporation (NYSE:MCD): MCD was a large top-three ~7% of the portfolio position as of last quarter. This quarter saw the stake reduced to a ~1.34% position at prices between $98 and $120. There was significant selling over the last three quarters as well: ~30% reduction at prices between $89 and $101. The original stake is from Q3 2014 at prices between $93 and $101. The following quarter saw a ~64% increase at prices between $91 and $97. The stock currently trades at $118.

Rayonier Inc. (NYSE:RYN): The small 1.62% RYN stake was established in 2013. Q2 2015 saw a ~11% increase at prices between $24.91 and $26.96 while last quarter saw a further ~28% increase at prices between $21.97 and $26.35. The pattern reversed this quarter: ~27% reduction at prices between $22 and $24.68. The stock currently trades at $19.08.

Note: Hawkins controls 6.5% of the business.

Royal Philips ADR (NYSE:PHG): PHG is a very long-term position first purchased in 2006. 2015 saw a combined ~42% reduction at prices between $23.69 and $30. The stock currently trades at $23.68 and the stake is at 2.46% of the portfolio.

Scripps Network Interactive (NYSE:SNI): SNI is a large top-five 6.51% of the portfolio position first purchased in 2011. The bulk of the current stake was purchased in Q3 & Q4 2014 at prices between $72.68 and $84.90. Q2 2015 saw a ~7% increase while last two quarters have seen marginal reductions. The stock currently trades at $53.72.

Note: Hawkins controls 13.8% of the business.

Vail Resorts (NYSE:MTN): MTN is a 1.98% position. It is a long-term stake first purchased in 2010 at a cost-basis in the low-40s. The original position saw a ~30% reduction in 2013 in the high-60s. Last quarter saw another ~24% reduction at prices between $101 and $112. The stock currently trades at $120. This quarter also saw a ~5% further trimming.

Note: Hawkins controls 4.7% of Vail Resorts.

ViaSat Inc. (NASDAQ:VSAT): The 2.54% VSAT stake was first purchased in Q2 2014 with the majority acquired the following quarter at prices between $54 and $59. Last quarter saw a one-third increase at prices between $56.38 and $64.41. The stock currently trades at $62.45. This quarter saw a marginal reduction.

Note: Hawkins controls 9.5% of VSAT.

Baidu Inc. (NASDAQ:BIDU), Franklin Resources (NYSE:BEN), and Triangle Petroleum Corp. (NYSEMKT:TPLM): These very small stakes (less than ~1% of the portfolio each) were further reduced this quarter.

Stake Increases:

CNH Industrial NV (NYSE:CNHI): CNHI is a 2.53% of the US long portfolio position built-up from Q3 2014 at prices between $7.46 and $10.18. Q2 2015 saw a minor ~5% trimming and that was followed by a ~16% reduction last quarter at prices between $6.38 and $9.64. This quarter the pattern reversed: ~18% increase at prices between $5.76 and $7.37. The stock currently trades at $6.31.

Note: Southeastern had a previous roundtrip with CNHI. A small stake purchased in 2012 was disposed of by Q2 2014.

Graham Holdings (NYSE:GHC): GHC is a medium-sized 3.08% of the portfolio stake first purchased in 2013. The last significant activity was a ~30% increase over Q2 & Q3 2014 at prices between $663 and $737. The stock currently trades at $471. This quarter saw a marginal increase.

Note: The prices quoted above are negatively skewed because of the spinoff of Cable One (NYSE:CABO) from Graham Holdings that closed on July 1, 2015. Shareholders of GHC received one share of CABO for each share of GHC held.

Wynn Resorts (NASDAQ:WYNN): WYNN is a top-five 7.86% stake established in Q1 2015 at prices between $94 and $159. It had a ~56% increase in Q2 2015 and another ~71% increase last quarter at prices between $53.12 and $111. The stock currently trades at $69.14. This quarter saw a minor ~4% increase.

National Oilwell Varco (NYSE:NOV) and United Technologies (NYSE:UTX): These two stakes saw large increases this quarter. NOV was increased by ~210% to a 3.27% stake at prices between $33 and $41. The stock is now well below that range at $27.55. UTX was increased by ~400% to a 4.74% position at prices between $88 and $101 and the stock currently trades at $85.95. For investors attempting to follow Hawkins, NOV and UTX are very good options to consider for further research.

Actuant Corporation (NYSE:ATU) and Melco Crown Entertainment (NASDAQ:MPEL): These very small stakes (less than ~1.5% of the portfolio each) were increased during the quarter. The position sizes are still very small.

Note: Southeastern controls 10.5% of ATU.

Kept Steady:

Deltic Timber (NYSE:DEL) and Tribune Media (NYSE:TRCO): DEL is a small 0.97% of the portfolio position first purchased in Q3 2014 at prices between $59.50 and $69.20. The original stake was more than doubled over Q4 2014 & Q1 2015 at prices between $62.32 and $69.36. Q2 2015 saw a ~200% further increase at prices between $64 and $69 and that was followed with another ~40% increase last quarter at prices between $59.11 and $69.47. The stock currently trades below the low end of his purchase price ranges at $55.15. The 1.25% TRCO stake was established last quarter at prices between $33.54 and $41.49 and it is now at $27.61.

Note: Hawkins controls 14.7% of DEL and 4.3% of TRCO.

The spreadsheet below highlights changes to Hawkins' US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I am/we are long CHK, DOW.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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