Tracking Mason Hawkins' Southeastern Asset Management Portfolio - Q4 2018 Update

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Includes: AGN, AMG, AMR, ATU, BEL, BIDU, CABO, CKHUY, CMCSA, CNHI, CNX, CTL, DWDP, FDX, FRFHF, FWONA, FWONK, GE, GHC, GLIBA, GOOG, GOOGL, HCMLF, HLT, KODK, LAZ, LLGLX, LLINX, LLPFX, LLSCX, MAT, MLCO, PCH, PK, RLGY, SOI, SUM, TV, UTX, VIPS, VSAT, WYNN, YUMC
by: John Vincent
Summary

Mason Hawkins’ 13F portfolio value decreased ~16% from 8.33B to $7B this quarter. The number of positions increased from 27 to 32.

Southeastern Asset Management added Wynn Resorts, while increasing General Electric, Yum China, and Lazard during the quarter.

The top three positions are CenturyLink, CNX Resources, and General Electric, and they add up to ~29% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Mason Hawkins’ 13F portfolio on a quarterly basis. It is based on Hawkins’ regulatory 13F Form filed on 02/14/2019. 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 2018.

This quarter, Hawkins’ 13F portfolio value decreased ~16% from $8.33B to $7B. The number of holdings increased from 27 to 32. The top three holdings are at ~29%, while the top five are at ~41% of the 13F assets: CenturyLink (CTL), CNX Resources (CNX), General Electric (GE), FedEx Corporation (FDX), and Graham Holdings (GHC).

Southeastern is best known for its investor-friendly attributes. The mutual funds in the Longleaf family are Longleaf Partners Fund (LLPFX) incepted in 1987, Longleaf Small-Cap Fund (LLSCX) incepted in 1989, Longleaf International Fund (LLINX) incepted in 1998, and the Longleaf Global Fund (LLGLX) incepted in 2012. The flagship Longleaf Partners Fund had a 15.51% return in 2017 and a dismal negative 18% return in 2018. Although the fund is focused on US mid-and-large cap businesses, the current allocation has three non-US companies in the top ten: CK Hutchison (OTCPK:CKHUY), LafargeHolcim Ltd. (OTCPK:HCMLF), and Fairfax Financial (OTCPK:FRFHF). Cash allocation is at ~2%, down from ~23% as of Q4 2017.

Note: Although their mutual funds are well-known among retail investors, it should be noted that the vast majority of Southeastern’s AUM ($14.1B total) is attributable to separately managed accounts.

Stake Disposals

None.

New Stakes

Wynn Resorts (WYNN), PotlatchDeltic Corp. (PCH), and DowDuPont (DWDP): These are medium-sized new positions established this quarter. The 2.39% WYNN stake was purchased at prices between $92 and $127, and the stock currently trades near the top end of that range at ~$126. PCH is a ~2% position established at prices between $29 and $40, and it is now at $35.91. The 1.85% DWDP stake was purchased at prices between $49 and $65, and it now goes for $54.25.

Note: Southeastern’s ownership stake in PotlatchDeltic is 4.6% of the business.

Melco Resorts (MLCO) and Grupo Televisa SAB (TV): These are minutely small new stakes established this quarter.

Stake Decreases

CenturyLink: CTL is currently the largest 13F position at ~14% of the portfolio. It came about as a result of the acquisition of Level 3 Communications by CenturyLink that closed in October 2017. Southeastern had a huge 28M share stake in Level 3 for which they received ~40M CTL shares in the ratio 1:1.4286. The terms called for $26.50 per share in cash as well. The position was increased by ~75% in Q4 2017 at prices between $13.50 and $20.50. The stock is now at $12.15. There was a marginal increase in Q1 2018 and minor reductions in the last three quarters. For investors attempting to follow, CTL is a good option to consider for further research.

Note: Regulatory filings since the quarter ended show them owning 67.4M shares. This is compared to 64.4M shares in the 13F report. Their cost basis on the position is $16.17. Southeastern has a ~6.2% ownership stake in CenturyLink.

CNX Resources: CNX is a top-three ~8% of the 13F portfolio stake. The original position is from 2012, when ~25M shares were purchased in the high-$20s price range. Q4 2014 and Q1 2015 saw a stake doubling at prices between $24 and $39. There have been minor adjustments since. The stock is now at $11. Q1 2018 saw a ~3% increase, while the last three quarters saw marginal trimming.

Note: The prices quoted above are adjusted for the coal spin-off last November. Southeastern has a ~24% ownership stake in CNX Resources.

Graham Holdings: GHC is a 5.94% of the portfolio stake first purchased in 2013. Q2 and Q3 2014 saw a ~30% increase at prices between $286 and $360. The stock currently trades at ~$682. The last two quarters have seen minor trimming.

Note: The prices quoted above are adjusted for the spin-off of Cable One (CABO) from Graham Holdings that closed on July 1, 2015. Shareholders of GHC received one share of CABO for each share of GHC held. Southeastern controls ~15% of Graham Holdings.

Alphabet Inc. (GOOG, GOOGL): GOOG is a large 5.21% portfolio position purchased in Q1 2015 at prices between $492 and $575, and increased by ~50% the following quarter at prices between $520 and $565. In recent activity, the last nine quarters have seen a two-thirds reduction at prices between $750 and $1270. The stock is now at $1148. Southeastern is realizing huge gains.

Park Hotels & Resorts (PK): PK, the December 2016 spin-off from Hilton Worldwide (HLT), is a 5.15% portfolio position purchased in Q2 2017 at prices between $25 and $28, and doubled the following quarter at around the same price range. The stock is now at $31.78. Q1 2018 saw a ~180% increase in the mid-$20s price range, as they got a large allocation from a subscription sale by distressed Chinese conglomerate HNA who sold its 25% stake. The last three quarters have seen a ~35% selling at prices between $26 and $34.

Note: Southeastern controls 6.9% of Park Hotels & Resorts.

Comcast Corporation (CMCSA): CMCSA is a large 4.12% of the portfolio position purchased last March in the low-$30s, and the stock currently trades at $38.73. Q2 2018 saw a ~27% increase at prices between $30.50 and $34.50, while last quarter saw a ~20% selling at prices between $33 and $38. There was another ~43% reduction this quarter at prices between $33 and $39.50.

Allergan plc (AGN): AGN is a fairly large 4.10% portfolio stake purchased in Q4 2017 at prices between $164 and $211, and increased by over one-third next quarter at prices between $144 and $188. The stock currently trades at ~$139. There was a ~4% trimming in Q2 2018 and a ~23% reduction last quarter at prices between $167 and $193. This quarter saw another ~6% trimming.

United Technologies (UTX): The bulk of the current ~4% UTX position was purchased in Q4 2015 at prices between $88 and $101. Q1 2016 saw a ~30% increase at around the same price range. The stock currently trades at ~$126. The last nine quarters have seen a ~40% selling at prices between ~$100 and ~$144.

Viasat Inc. (VSAT): The 2.77% VSAT stake was first purchased in Q2 2014, with the majority acquired the following quarter at prices between $54 and $59. Q3 2015 saw a one-third increase at prices between $56 and $64.50. There was a ~16% increase in Q1 2017 at prices between $63 and $70, and that was followed with an ~11% increase in Q3 2017. The stock currently trades at $75.47. The last five quarters have seen a combined ~43% selling at prices between $56 and $79.

Note: Regulatory filings since the quarter ended show them owning 2.6M shares. This is compared to 3.3M shares in the 13F report. Their ownership stake is now at 4.4%.

CNH Industrial NV (CNHI): CNHI is a 1.39% of the portfolio position built up from Q3 2014 at prices between $7.50 and $10. The position has wavered. In recent activity, Q2 2018 saw a one-third increase at prices between $10.50 and $13, while the last two quarters saw a ~23% selling at prices between $8.50 and $12.50. The stock is now at $11.

Belmond Ltd. (BEL) and Solaris Oilfield Services (SOI): These two very small (less than ~1% of the portfolio each) stakes were reduced this quarter.

Stake Increases

General Electric: The large (top-three) 6.59% GE position was established in Q4 2017 at prices between $17 and $25, and increased by ~185% next quarter at prices between $13 and $19. Last quarter saw another ~26% increase at prices between $11.25 and $14.25, and that was followed with a ~40% further increase this quarter at prices between $6.70 and $13.50. It is now at $10.38.

FedEx Corporation: FDX is a very long-term position that has been in the portfolio since 2000. Currently, it is a large (top-five) stake at ~6% of the portfolio. In recent activity, the five quarters through Q4 2017 saw a combined ~50% reduction at prices between $170 and $250. The stock currently trades at ~$181. There was a minor increase this quarter.

Mattel Inc. (MAT): MAT is now a large 5.68% portfolio stake. It was established in Q3 2017 at prices between $14.50 and $21.50, and increased by ~250% the following quarter at prices between $13 and $19. The stock currently trades at $14.88. For investors attempting to follow Southeastern, MAT is a good option to consider for further research. The last few quarters have seen minor increases.

Note: Southeastern has an ~11.5% ownership stake in Mattel Inc.

Summit Materials (SUM), Affiliated Managers Group (AMG), Yum China (YUMC), and Lazard Ltd. (LAZ): These four positions established last quarter were increased substantially this quarter. The 2.27% SUM stake was established at prices between $18 and $27, and increased by ~40% this quarter at prices between $11.25 and $18. The stock currently trades at $17.62. The 2.56% AMG stake was purchased at prices between $137 and $160, and increased by ~55% this quarter at prices between $90 and $138. It is now at ~$110. YUMC and LAZ were very small new stakes established last quarter. This quarter saw the YUMC position built to a 2.53% portfolio stake at prices between $31 and $37, and the stock currently trades at $40.93. The LAZ position was built to a 2.17% portfolio stake at prices between $34 and $48, and it is now at $37.72.

Baidu Inc. (BIDU), GCI Liberty (GLIBA), and Vipshop Holdings (VIPS): These small (less than ~2% of the portfolio each) stakes were increased this quarter.

Kept Steady

Liberty Media Formula One (FWONA, FWONK): FWONK is a ~3% of the portfolio stake established in Q2 2016 at prices between $17.50 and $20, and the stock currently trades well above that range at $33.88. There was a one-third reduction in Q2 2017 at prices between $30.50 and $37, while Q2 2018 saw a similar increase at around the same price range.

Note: Following the acquisition of Formula One, Liberty Media was renamed Liberty Media Formula One and the stock symbols changed.

Realogy Holdings (RLGY): RLGY is a ~2% stake purchased in Q4 2017 at prices between $26 and $34, and increased by ~20% next quarter. There was an ~18% increase in Q2 2018 at prices between $23 and $28, and that was followed with a ~24% increase last quarter at prices between $20 and $24. The stock is currently at $13.52.

Actuant Corporation (ATU), Alta Mesa Resources (AMR), and Eastman Kodak Co. (KODK): These are small (less than ~2% of the portfolio each) stakes kept steady this quarter.

Note: Southeastern has a 30.4% ownership stake in Eastman Kodak (11.5M of the 16.45M share stake is in pfd cnvrts, which is not listed in the 13F report) and a 9.8% ownership stake in Actuant Corporation.

The spreadsheet below highlights changes to Hawkins’ 13F stock holdings in Q4 2018:

Mason Hawkins - Southeastern - Longleaf Partners - Q4 2018 13F Report Q/Q Comparison

Disclosure: I am/we are long CKHUY, CNX, CTL, DWDP, GE, TV. 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.