WBD - Tracking Southeastern Asset Management Portfolio - Q4 2022 Update

2023-03-21 04:41:02 ET

Summary

• Southeastern’s 13F portfolio value decreased from $3.97B to $2.85B this quarter. The number of positions increased from 38 to 39.
• They increased Oscar Health while decreasing Renaissance RE, General Electric, Lumen Tech, and Affiliated Managers Group.
• The top three positions are Mattel, Lumen Technologies, and CNX Resources, and they add up to ~22% of the portfolio.

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 2/14/2023. 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 Q3 2022.

This quarter, Southeastern's 13F portfolio value decreased ~28% from $3.97B to $2.85B. The number of holdings increased from 38 to 39. The top three holdings are at ~22% while the top five are at one-third of the 13F assets: Mattel, Lumen Technologies, CNX Resources, Hyatt Hotels, and General Electric.

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 returned negative 23.25% for 2022 vs negative 18.1% for S&P 500 index. Annualized returns since the 1987 inception is 9%. CK Hutchison ( OTCPK:CKHUY ), the lone non-US stake in their top holdings was disposed of during the quarter. Cash allocation is less than 5%, down from an average of ~15% in 2021.

Note: 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:

RXO Inc. ( RXO ): RXO is a spin-off from XPO Logistics. Shares started trading in November at $21.50 and currently go for $19.24. Southeastern had a position in XPO Logistics for which they received these shares (1:1 ratio). They also increased the resultant position substantially at prices between ~$16 and ~$21.50 during the quarter.

Stake Decreases:

Mattel Inc. ( MAT ): MAT is currently the largest 13F stake at 7.52% of the portfolio. 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. The last five quarters have seen a ~35% selling at prices between ~$18.70 and ~$26.40. The stock currently trades at $16.34.

Lumen Technologies ( LUMN ) previously CenturyLink: LUMN is currently the second largest 13F position at 7.30% 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 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 $2.49. There was a one-third reduction this quarter at prices between ~$5 and ~$8.

CNX Resources ( CNX ): CNX is a top-three 6.78% 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. The last four quarters saw a ~60% reduction at prices between ~$13.75 and ~$23.25. The stock is now at $15.53.

Note: They have a ~6.4% ownership stake in the business. The prices quoted above are adjusted for the coal spin-off in November 2017.

Hyatt Hotels ( H ): Hyatt Hotels is a large (top five) 5.75% 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. There was a one-third reduction tis quarter at prices between ~$80.50 and ~$101. The stock now trades at ~$109.

General Electric ( GE ): The 5.47% 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 thru 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. This quarter saw a ~40% reduction at prices between ~$48 and ~$69. The stock is now at $89.92.

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

Affiliated Managers Group ( AMG ): The 5.17% 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 in Q1 2022 at prices between ~$122 and ~$167. This quarter saw a ~42% reduction at prices between ~$112 and ~$163. The stock is now at ~$134.

FedEx Corporation ( FDX ): FDX is a very long-term position that has been in the portfolio since 2000. Currently, it is at 4.77% of the portfolio. Recent activity follows: There was a one-third increase in Q3 2021 at prices between ~$219 and ~$300. That was followed with a ~25% stake increase in the next quarter at prices between ~$218 and ~$259. The last two quarters saw a ~43% selling at prices between ~$143 and ~$248. The stock currently trades at ~$216.

MGM Resorts International ( MGM ): The 4.38% 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. That was followed with a ~30% selling this quarter at prices between ~$29.75 and ~$38. The stock currently trades at $41.79.

IAC ( IAC ): IAC is a ~4% of the portfolio position purchased in Q3 2021 at prices between ~$124 and ~$154 and it is now well below that range at ~$50. 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 next two quarters at prices between ~$73 and ~$138. The last two quarters saw a ~13% selling at prices between ~$42 and ~$81.

Warner Bros. Discovery ( WBD ): The fairly large ~4% 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 during Q2 2022 at prices between ~$13 and ~$26. The last two quarters have seen a ~20% reduction at prices between ~$8.90 and ~$17.50. The stock currently trades at $14.24.

PVH Corp ( PVH ): The 3.50% PVH stake was established during Q2 2022 at prices between ~$57 and ~$81 and it is now at $72.51. This quarter saw a ~40% selling at prices between ~$45 and ~$76.

Alphabet Inc. ( GOOG ): GOOG is a 3.42% of the portfolio position purchased during Q2 2022 at prices between ~$106 and ~$144 and the stock currently trades at ~$102. This quarter saw a ~25% reduction at prices between ~$84 and ~$105.

Fiserv ( FISV ): FISV is a 3.18% of the portfolio position established in Q4 2021 at prices between ~$96 and ~$111. There was a ~60% stake increase next quarter at prices between ~$93 and ~$110. There was a ~20% selling this quarter at prices between ~$94 and ~$106. The stock is now at ~$111.

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. This quarter saw a ~50% selling at prices between ~$31 and ~$39. The stock currently trades at $33.43, and the stake is at ~3% of the portfolio.

White Mountains Insurance ( WTM ): The 2.75% WTM stake was built during the two quarters through Q1 2022 at prices between ~$1042 and ~$1394. The stock currently trades at ~$1331. This quarter saw a ~50% reduction at prices between ~$1290 and ~$1423.

Warner Music Group ( WMG ): WMG is a 2.73% of the portfolio position established last quarter at prices between ~$23 and ~$32 and it is now at $30.34. There was a one-third reduction this quarter at prices between ~$22.35 and ~$35.60.

Liberty Braves ( BATRK ) and Liberty Broadband ( LBRDK ): BATRK is a 2.68% of the portfolio position built during Q3 2020 at a cost-basis of ~$20. This quarter saw a ~25% reduction at prices between ~$27.50 and ~$33.25. The stock currently trades at $32.51. The 2.69% of the portfolio LBRDK stake was purchased in Q4 2021 at prices between ~$148 and ~$177 and it is now well below that range at ~$79.30. There was a ~17% stake increase in Q1 2022 at prices between ~$135 and ~$161. That was followed with a ~42% increase next quarter at prices between ~$103 and ~$141. There was a one-third reduction this quarter at prices between ~$69.60 and ~$91.

Note 1: They have a ~8.4% ownership stake in Liberty Braves.

Note 2: Their Comcast position was disposed and exchanged for Liberty Broadband based on a relative undervaluation thesis.

Anywhere Real Estate (HOUS) previously Realogy Holdings, CNH Industrial NV ( CNHI ), Cardinal Health ( CAH ), Douglas Emmett ( DEI ), Empire State Realty ( ESRT ), Graham Holdings ( GHC ), H World Group ( HTHT ), JOYY Inc. ( OTC:YYINZ ) ( YY ), Madison Square Garden Sports ( MSGS ), Paya Holdings (PAYA), RenaissanceRe ( RNR ), Stanley Black & Decker ( SWK ), and Vimeo Inc. ( VMEO ): These small (less than ~2.5% of the portfolio each) stakes were reduced this quarter.

Note: They have significant ownership stakes in the following businesses: 6.5% of VMEO, 5.9% of HOUS, 5.2% of ESRT, and 3% of GHC.

Stake Increases:

Oscar Health ( OSCR ): The 1.26% of the portfolio stake in OSCR saw a ~30% stake increase this quarter at prices between ~$2.15 and ~$5.20. The position was first purchased in Q4 2021 at prices between ~$7.85 and ~$17.65. The stock currently trades at $3.37.

Note: They have a ~8% ownership stake in Oscar Health.

Kept Steady:

Westrock Coffee Company ( WEST ) and Masonite International ( DOOR ): Westrock came to market through a SPAC transaction. Southeastern invested in the PIPE at $10 per share. The stake is at 3.75% of the portfolio and the stock currently trades at ~$12. The 1.14% DOOR stake was purchased last quarter at prices between ~$66 and ~$94 and it is now at ~$86.

Note: They have a ~10% ownership stake in Westrock Coffee Company.

Comcast Corporation ( CMCSA ), Melco Resorts ( MLCO ), Syneos Health ( SYNH ), and XPO ( XPO ): These very small (less than ~0.1% of the portfolio each) stakes were kept steady this quarter.

The spreadsheet below highlights changes to Southeastern's 13F stock holdings in Q4 2022:

For further details see: