The Tennessee Titan: Mason Hawkins

This article is part of a series on learning from the greatest investment managers. Start off at the beginning.

Mason Hawkins of Southeastern Asset Management makes big bets on big companies using big money. And he does it better than most. After all, over the past 15 years, Southeastern has outperformed the S&P 500, with average annual returns of 14.8% versus 10.9% for the index. You definitely want to keep tabs on this portfolio.

Southeastern Asset Management offers three main funds: the Partners Fund, the Small Cap Fund, and the International Fund. In a recent letter to shareholders, Hawkins said there wasn't much action taking place in the portfolios. But let's look for ourselves to see what we can learn.

These are the highlights from Hawkins' most recent 13-F filing with the SEC, with the numbers of shares in thousands.

Have Hawkins and Wally Weitz been talking recently? Both managers have been trimming back their stakes in cable provider Comcast -- Weitz more than Hawkins. The same can be said for News Corp., recently eliminated from Southeastern's International Fund.

In the annual letter to shareholders, Hawkins commented that Comcast had great operations, plenty of room to grow, and a great leader in Brian Roberts. So I would venture that the reduction in shares is portfolio-related rather than a comment on its worthiness as an investment. The News Corp. elimination says one of two things: Either the recent price run-up put it above Hawkins' estimate of its intrinsic value, or the business is somehow impaired such that it needs to sell. My money would be on the former.

Private equity firm Apollo Management purchased Jacuzzi for $12.50 a share earlier this year. Although Southeastern did make a decent return from the transaction, Hawkins said specifically that he would vote against the deal. That's because he viewed the value of the company as higher than the offering price and thought new management could create plenty of value going forward. Alas, not all shareholders agreed -- they voted to take the money and run.

Before you get too excited about the huge jump in the number of Level 3 shares, know that Southeastern converted its convertible debt holding into shares. Motley Fool CAPS investors would agree with that call; they give the company a four-star rating out of a possible five.

Natural-gas exploration and production company Chesapeake Energy is a popular stock among value investors today. After all, with good finding costs and huge reserves, there's a lot of value in the ground waiting to come to the market. I haven't studied the Inside Value recommendation in depth, but it seems like an asymmetric bet. If natural-gas prices don't rise, the gas is still valuable and the reserves put a floor on the stock price. However, if gas prices rise and the company can decrease production costs as it taps the gas, then the upside could be very large. And considering that Hawkins made a very timely addition to the portfolio, I wonder whether he sees it in a similar way.

EnCana is another variation on the energy theme. This time, we're north of the border in Canada, where EnCana has big natural-gas reserves coupled with oil sands. As little as I know about the natural-gas market, I know even less about oil sands. The only thing of value I have to offer here is that CAPS investors like the company's prospects and give it a four-star rating.

When I first read about Del Monte showing up in the portfolio, I scratched my head. It seems like such a tired company. But then it hit me: Maybe there's some hidden value. After all, management has a nice portfolio of brands from which to create value. And if the company can continue to use that brand power to raise prices, it could take its cash-flow generation and return on invested capital metrics to a higher level.

The Foolish bottom line
I've been a big fan of Mason Hawkins for quite awhile. And of all the portfolio changes, Del Monte offers the best lesson: Don't count out an older company with mature brands, because the future is likely to look nothing like the past. With the right set of incentives, good managers can find ways to reinvigorate those brands.

That means I'll be looking deeper into Del Monte to try to find out what else Hawkins might see there.

Next month, we'll start with Fairholme's Bruce Berkowitz and move on to Maverick's Lee Ainslie.

Chesapeake Energy is an Inside Value recommendation. The newsletter looks for the best companies at the best prices. To see how lead analyst Philip Durell is outperforming the market, sign up today for your free 30-day trial.

Retail editor and Inside Value team member David Meier does not own shares of any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.