Every quarter, many money managers have to disclose what they've bought and sold via 13F filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at Southeastern Asset Management, run by respected value investor Mason Hawkins since 1975. He and his partner also manage the venerable Longleaf Partners Fund, which has a 20-year cumulative return of 613% versus 356% for the S&P 500.
Hawkins has described his investing approach as seeking out companies with "good business, good performance, and a good price."
The company's reportable stock portfolio totaled $24 billion in value as of March 31, 2012.
The fund's top three holdings, representing 24% of its total assets, are Dell, Chesapeake Energy, and DIRECTV. Along with Carl Icahn, Hawkins has been an activist investor with scandal-ridden Chesapeake, agitating for much better governance.
So what does Southeastern's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Republic Services (NYSE: RSG ) and CONSOL Energy (NYSE: CNX ) . Republic Services' stock got a haircut back in April, after its quarterly results disappointed investors. Its long-term prognosis is good, though, as managing waste is a service that will long be in demand. The company sports an attractive 3.5% dividend yield as well. It has been investing in its recycling business, which offers higher margins and is expected to jump by 12% over the next year and a half.
CONSOL Energy specializes in coal and natural gas and operates in promising shale fields. Some like its operating efficiency, but others don't like its debt levels and recent valuation. Metallurgical coal has become an increasingly important part of its business, too, as it's a critical component for steel. As the global economy recovers, there should be more demand for steel.
Among holdings in which Southeastern increased its stake was Level 3 Communications (Nasdaq: LVLT ) . It's an impressive vote of confidence, since this stock has averaged annual losses of more than 24% over the past five years and losses of 7% annually over the past decade. Over that time, the company has burned through lots of cash and racked up debt. So what's to like? Well, it is a content-delivery service, used by Netflix, no less, and it also operates a fiber-optic network at a time when fiber-optic networks are big business. Those offer promise, but the company has yet to deliver.
Southeastern reduced its stake in lots of companies, including insurance broker and reinsurance specialist Willis Group Holdings (NYSE: WSH ) . The company took a hit earlier in the year, after posting disappointing earnings, but it has recently pleased many with rising revenue and successful cost-cutting. Low interest rates have hurt the company's performance, and that scenario is likely to persist for the near future.
Finally, Southeastern unloaded all its shares of Yum! Brands (NYSE: YUM ) , owner of Taco Bell, KFC, and Pizza Hut. The company has experienced a slowing of sales growth in China, which generates a whopping 40% of profits. But sales are still growing, and emerging markets are likely to help the company grow at rates faster than the U.S. economy.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.
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