Tracking Southeastern Asset Management Portfolio - Q2 2022 Update

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John Vincent
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Summary

  • Southeastern’s 13F portfolio value decreased from $5.66B to $4.74B this quarter. The number of positions increased from 35 to 36.
  • They increased IAC/Interactive, Hyatt Hotels, General Electric, Warner Bros. Discovery, and Liberty Broadband and Affiliated Managers Group while decreasing CNX Resources. They also dropped Biogen and Williams Companies.
  • The top three positions are Lumen Technologies, Mattel, and FedEx Corporation, and they add up to ~28% of the portfolio.

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This article is part of a series that provides an ongoing analysis of the changes made to Southeastern Asset Management's 13F portfolio on a quarterly basis. It is based on Southeastern's regulatory 13F Form filed on 8/12/2022. Please visit our Tracking Mason Hawkins' Southeastern Asset Management Portfolio series to get an idea of their investment philosophy and our previous update for the fund's moves during Q1 2022.

This quarter, Southeastern's 13F portfolio value decreased ~16% from $5.66B to $4.74B. The number of holdings increased from 35 to 36. The top three holdings are at ~28% while the top five are at ~39% of the 13F assets: Lumen Technologies, Mattel, FedEx, CNX Resources, and IAC/Interactive.

Southeastern is best known for its investor friendly attributes. The mutual funds in the Longleaf family are Longleaf Partners Fund (MUTF:MUTF:LLPFX) incepted in 1987, Longleaf Partners Small-Cap Fund (MUTF:MUTF:LLSCX) incepted in 1989, Longleaf Partners International Fund (MUTF:MUTF:LLINX) incepted in 1998, and the Longleaf Partners Global Fund (MUTF:MUTF:LLGLX) incepted in 2012. The flagship Longleaf Partners Fund returned negative 16% for H1 2022 vs. negative 19.96% for S&P 500 index. Annualized returns since the 1987 inception is 9.41%. Although, the fund is focused on US mid-and-large cap businesses, the current allocation has two non-US businesses among the top holdings: Holcim (OTCPK:HCMLY) and CK Hutchison (OTCPK:CKHUY). Cash allocation is ~3%, down from an average of ~15% last year.

Note 1: Regulatory filings from earlier this week show them owning 8M shares (~11% of business) of Westrock Coffee Company (WEST). WEST came to market through a SPAC transaction. Southeastern invested in the PIPE.

Note 2: Although their mutual funds are well-known among retail investors, it should be noted that a sizable portion of Southeastern's AUM is attributable to separately managed accounts.

New Stakes:

Alphabet Inc. (GOOG), PVH Corp. (PVH), and Stanley Black & Decker (SWK): GOOG is a 3.51% of the portfolio position purchased this quarter at prices between ~$106 and ~$144 and the stock currently trades just below that range at ~$105. The 2.56% PVH stake was established at prices between ~$57 and ~$81 and it is now near the low end of that range at $57.31. SWK is a small ~1% stake purchased at prices between ~$102 and ~$145 and it is now well below that range at $87.39.

Stake Disposals:

Biogen (BIIB): The 3.14% of the portfolio position in BIIB was purchased in Q4 2021 at prices between ~$224 and ~$288. The disposal this quarter was at prices between ~$188 and ~$223. The stock currently trades at ~$204.

Williams Companies (WMB): WMB was a 1.28% of the portfolio stake purchased in Q4 2019 at prices between $22 and $24 and increased by roughly two-thirds next quarter at prices between $9.25 and $24. Q2 2020 saw a ~30% selling at prices between $13.30 and $21.60. That was followed with a ~70% reduction last quarter at prices between ~$26.50 and ~$33.50. The remaining position was sold this quarter at prices between ~$30 and ~$38. The stock currently trades at $32.79.

Stake Decreases:

Lumen Technologies (LUMN), previously CenturyLink: LUMN is currently the largest 13F position at ~14% of the 13F 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 CenturyLink 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 $9.15. Last several quarters have seen only minor activity.

Note: Their cost basis on the position is ~$16. Southeastern has a ~6% ownership stake in CenturyLink.

Mattel, Inc. (MAT): MAT is a large (top three) 7.60% 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 two quarters through Q1 2021 had seen a ~43% selling at prices between ~$12 and ~$21. There was a ~18% stake increase in Q2 2021 at prices between ~$19 and ~$22. That was followed with a ~10% increase in Q4 2021. Last quarter saw a ~20% selling at prices between ~$19.50 and ~$25.60. The stock currently trades at $23.04. There was marginal trimming this quarter.

FedEx Corporation (FDX): FDX is a very long-term position that has been in the portfolio since 2000. Currently, it is a large top three stake at 6.55% of the portfolio. Recent activity follows: the five quarters through Q4 2017 saw a combined ~50% reduction at prices between $170 and $250. 2020 saw another ~63% selling at prices between ~$108 and ~$301. There was a one-third increase in Q3 2021 at prices between ~$219 and ~$300. That was followed with a ~25% stake increase next quarter at prices between ~$218 and ~$259. The stock currently trades at ~$205. Last two quarters saw minor trimming.

CNX Resources (CNX): CNX is a top-three 5.49% of the 13F portfolio stake. The original position was from 2012 when ~25M shares were purchased in the high-20s price range. Q4 2014 & Q1 2015 saw a stake doubling at prices between $24 and $39. There was a ~18% stake increase in Q2 2019 at prices between $6.15 and $10.90. Q2 2020 saw a ~25% selling at prices between $5.50 and $13. Q1 2021 saw another ~17% selling at prices between ~$11 and ~$15.75. Last two quarters saw a ~42% reduction at prices between ~$14 and ~$24. The stock is now at $16.91.

Note: The prices quoted above are adjusted for the coal spin-off in November 2017. Southeastern has a ~8% ownership stake in CNX Resources.

Affiliated Managers Group (AMG): The 4.31% AMG stake was purchased in Q3 2018 at prices between $137 and $160 and increased by ~55% next quarter at prices between $90 and $138. 2019 had seen a ~25% selling at prices between $75 and $116. Q2 2021 saw a ~20% increase at prices between ~$149 and ~$175. That was followed with a ~15% increase last quarter at prices between ~$122 and ~$167. The stock is now at ~$128. There was marginal trimming this quarter.

Lazard Ltd (LAZ): The LAZ position was a very small stake first purchased in Q3 2018. Next quarter saw the position built at prices between $34 and $48. 2019 saw a ~50% stake increase at prices between $31 and $40.50. The three quarters through Q1 2021 had seen a ~35% selling at prices between ~$27 and ~$47. Next two quarters had seen a ~25% stake increase at prices between ~$43 and ~$49. The stock currently trades at $36.51, and the stake is at 3.55% of the portfolio. There was marginal trimming in the last three quarters.

Note: They have a ~5% ownership stake in the business.

MGM Resorts International (MGM): The 3.38% MGM position was purchased in Q3 2020 at prices between $15 and $24. Next quarter saw a ~40% stake increase at prices between ~$20 and ~$32. There was a ~20% reduction in Q1 2021 at prices between ~$28 and ~$41. The stock currently trades at $33.87. Last five quarters have seen only minor adjustments.

Graham Holdings (GHC): GHC is a ~3% of the portfolio stake first purchased in 2013. Q2 & Q3 2014 saw a ~30% increase at prices between $286 and $360. The eleven quarters through Q1 2021 had seen a ~75% selling at prices between ~$278 and ~$620. Next three quarters had seen a ~45% stake increase at prices between ~$560 and ~$677. The stock currently trades at ~$553. Last two quarters have seen a ~14% trimming.

Note 1: They have a ~6.8% ownership stake in the business.

Note 2: The prices quoted above are adjusted for the spinoff 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 ~6% of Graham Holdings.

Madison Square Garden Sports (MSGS): MSGS is a 2.60% of the portfolio position purchased in Q2 2021 at prices between ~$170 and ~$192 and the stock currently trades at ~$155. There was a ~20% stake increase in H2 2021 at prices between ~$154 and ~$201. Last two quarters have seen a ~12% trimming.

RenaissanceRe (RNR): The 2.33% RNR stake was established in Q3 2021 at prices between ~$138 and ~$164 and it is now at ~$146. There was a ~17% stake increase in Q4 2021 at prices between ~$139 and ~$173. Last two quarters saw a one-third reduction at prices between ~$138 and ~$171.

Douglas Emmett (DEI): DEI is a 2.19% of the portfolio stake established in Q4 2020 at prices between ~$23.25 and ~$33.30 and the stock currently trades at $21.07. There was a one-third stake increase in Q2 2021 at prices between ~$31.40 and ~$36.75. This quarter saw a ~11% trimming.

Note: the Q4 2020 commentary talks about this investment - they had followed the business since 2011 and they pulled the trigger as the COVID "death of office space" narrative opened up an opportunity to acquire a position at a good price.

Fiserv (FISV): FISV is a 2.18% of the portfolio position established in Q4 2021 at prices between ~$96 and ~$111 and it now goes for ~$106. There was a ~60% stake increase last quarter at prices between ~$93 and ~$110. This quarter saw marginal trimming.

Empire State Realty (ESRT): The 2.11% ESRT stake was built in H1 2020 at prices between $6.50 and $14.30 and it currently trades at $7.24. There was a ~20% selling in Q1 2021 at prices between $8.95 and $11.85 while next quarter saw a ~6% stake increase. That was followed with a ~18% stake increase in Q3 2021 at prices between $9.65 and $12.25. Last three quarters have seen minor trimming.

Note: They have a ~8.3% ownership stake in the business.

CNH Industrial NV (CNHI), JOYY Inc. (OTC:YYINZ) (YY), Liberty Braves (BATRK), and Melco Resorts (MLCO): These very small (less than ~1.6% of the portfolio each) stakes were decreased this quarter.

Note: their Q2 2022 letter disclosed they have exited their position in CNH Industrial.

Stake Increases:

IAC Inc. (IAC): IAC is a 4.79% of the portfolio position purchased in Q3 2021 at prices between ~$124 and ~$154 and it is now well below that range at $64.94. There was a ~20% stake increase in Q4 2021 at around the same price range. That was followed with a ~50% stake increase over the last two quarters at prices between ~$73 and ~$138.

Hyatt Hotels (H): Hyatt Hotels is a 4.51% of the portfolio stake established in Q1 2020 at prices between $36.50 and $93. Next quarter saw a ~50% stake increase at prices between $40 and $67.50. That was followed with a ~27% increase in Q3 2020 at prices between ~$48 and ~$61. The two quarters through Q1 2021 had seen a ~23% selling at prices between ~$66 and ~$91. Q3 2021 saw a ~18% stake increase while in the last two quarters there was a ~40% selling at prices between ~$77 and ~$107. The stock now trades at $90.53. This quarter saw a ~19% stake increase.

General Electric (GE): The 4.40% GE position was established in Q4 2017 at prices between ~$136 and $200 and increased by ~185% next quarter at prices between ~$104 and $152. Q3 2018 saw another ~26% increase at prices between ~$90 and ~$114 and that was followed with a ~40% further increase next quarter at prices between ~$54 and ~$108. The six quarters through Q2 2020 had seen a ~47% selling at prices between ~$44 and ~$104. There was another one-third selling in Q1 2021 at prices between ~$84 and ~$112. Q4 2021 saw a ~23% stake increase at prices between ~$90 and ~$111. The stock is now at $70.84. There was a ~8% trimming last quarter while this quarter there was a ~12% increase.

Note: the prices quoted above are adjusted for the 1-for-8 reverse stock-split last July.

Warner Bros. Discovery (WBD): The fairly large 4.23% of the portfolio stake in WBD was established in Q3 2021 at prices between ~$24 and ~$29. Next quarter saw a ~20% stake increase at prices between $21.50 and $27. That was followed with a ~25% increase this quarter at prices between ~$13 and ~$26. The stock currently trades at $12.95.

Liberty Broadband (LBRDK): The 3.59% of the portfolio LBRDK stake was purchased in Q4 2021 at prices between ~$148 and ~$177 and it is now below that range at ~$95. There was a ~17% stake increase last quarter at prices between ~$135 and ~$161. That was followed with a ~42% increase this quarter at prices between ~$103 and ~$141.

Note: Their Comcast position was disposed and exchanged for Liberty Broadband based on a relative undervaluation thesis.

Anywhere Real Estate (HOUS), previously Realogy Holdings: HOUS is a 2.36% stake purchased in Q4 2017 at prices between $26 and $34 and increased by ~20% next quarter. There was a ~18% increase in Q2 2018 at prices between $23 and $28 and that was followed with a ~24% increase next quarter at prices between $20 and $24. The first three quarters of 2019 had also seen a ~75% stake increase at prices between $4.50 and $18.50. Q2 & Q3 2020 had seen a ~47% reduction at prices between $2.35 and $11.50. There was a ~25% stake increase in Q3 2021 at prices between ~$16 and ~$19. The stock is currently at $9.47. Last three quarters have seen only minor adjustments.

Note: Southeastern controls ~9% of the business.

H World Group (HTHT), White Mountains Insurance (WTM), and XPO Logistics (XPO): These small (less than ~2.5% of the portfolio each) stakes were increased during the quarter.

Kept Steady:

Comcast Corporation (CMCSA), Ingles Markets (IMKTA), Cardinal Health (CAH), Oscar Health (OSCR), Paya Holdings (PAYA), Syneos Health (SYNH), and Vimeo Inc. (VMEO): These small (less than ~1.5% of the portfolio each) stakes were kept steady this quarter.

Note: They have a ~6.5% ownership stake in Oscar Health and a ~8.4% ownership stake in Liberty Braves.

The spreadsheet below highlights changes to Southeastern's 13F stock holdings in Q2 2022:

Mason Hawkins - Southeastern Asset Management's Q2 2022 13F Report Q/Q Comparison

Mason Hawkins - Southeastern Asset Management's Q2 2022 13F Report Q/Q Comparison (John Vincent (author))

This article was written by

John Vincent profile picture
21.96K Followers
Focused on cloning strategies by analyzing 13F reports of a curated set of around fifty super-investors and generating Absolute Returns thru exploiting inefficiency, volatility, and momentum.

Disclosure: I/we have a beneficial long position in the shares of CKHUY, ESRT, GOOGL, LUMN, WBD either through stock ownership, options, or other derivatives. 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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