Longleaf's 2Q Report

[Packer16]

Interesting viewpoint on stock versus bond values going back to the 1950s and how they are planning on improving investment process to reduce the number of mistakes they have made such as Dell, Chesapeake, HRT and Level 3.

 

http://www.longleafpartners.com/quarterly_reports/Longleaf063013.pdf

 

Packer

[Guest hellsten]

Thanks. This quote is a bit surprising:

We believe in a long-term time horizon

for stock returns – we are less patient about value

growth. We will exit more quickly - as we did

within a few quarters at Republic Services,

Leucadia, Vivendi, and Anglo American last year -

when competitive advantages or values appear at

risk and we do not believe becoming more active

would yield results.

 

Is Leucadia's competitive advantage or value at risk?

 

And does anyone here know why Francis Chou sold LVLT?

[Packer16]

It could be their competitive advantage was Cummings & Stienberg and since they are no longer actively involved in the business that edge is reduced until Sandler & co prove they have the same turnaround expertise.

 

Packer

[Guest wellmont]

it really looks like these guys are very good with small and mid size companies. they have under-performed in the large cap fund over 10 years (as the fund has gotten bigger). but outperformed in small cap fund over 10 years. It seems obvious to me, but size of the Partners fund has hurt them. they have had to find big ideas in big companies, and that's a more competitive game. The old adage applies here: size hurts performance.

[Packer16]

You are correct it is very difficult to find a inefficiencies in large cap stocks.  When you find one you are most likely finding a value trap unless there is a constraint preventing others from entering.  It is interesting that Longleaf is going into BRK while Sequoia is leaving due to underperformance in the last few downturns.

 

Packer

[ASTA]

Well the good thing is that value traps become opportunity's at certain prices CHK, DELL. Fell sorry for them but hey I would switch to there shoes any day so don't feel bad about cocktailing them at good price's. But do like there commentary and there picks are quite good and like Mohnish Pabrai says great to learn from there mistakes the last ten years.   

[jay21]

My favorite quote was:

 

"We will avoid being seduced by more attractive P/Vs if generated by lower prices without higher values."

 

While I do not subscribe to this theory 100%, it reminds me that one important quality I look for in all my investments is a growing V (or value).  I try to avoid melting ice cubes.

[constructive]

"Where we have been wrong on our qualitative inputs, our returns have suffered, as with Dell, Chesapeake, Level 3, and HRT."

 

Which I think is interesting, since I found those particular losses easy to avoid primarily on a quantitative basis.

[educatedidiot]

Longleaf (Southeastern) filed their Q1 13-F: http://www.rocketfinancial.com/Holdings.aspx?id=277&fC=1

 

Not too many major changes but they bought Belmond, sold out of RYN and TRCO and sold almost all of their RL and DD.

[rogermunibond]

How long ago was their RL position initiated?  Any trip to TJX and seeing that monstrous inventory of RL/Polo product that sits there would be enough to dissuade any investor.  Seems like Polo/RL has lost is cachet.  Interestingly, so has J.Crew and Vineyard Vines, whom I thought would have benefited from RL weakness.

[educatedidiot]

rogermunibond,

 

If you click on the "Hist" link on the Ralph Lauren row you can see the full history of when Southeastern initially bought those RL shares, added more, sold, etc and what the share price was during those quarters.  You can of course see the ownership history for any of their positions this way, but here's the RL one:

http://www.rocketfinancial.com/OwnHist.aspx?sID=41028&fID=277

 

It looks like they bought most of the position during Q2 of last year, added a bit more in succeeding quarters, and just dumped most of it now in Q1 likely at a loss.

[educatedidiot]

Longleaf (Southeastern) filed their Q3 13-F: http://www.rocketfinancial.com/Holdings.aspx?id=277&fC=1

 

They bought Mattel and Solaris Oilfield Infrastructure and sold out of Scripps and Everest Re.

[stahleyp]

LLPFX has a terrible track record (short and long term). They've underperformed the S&P 500 over the past 15 years by almost 2.5% annually. Quite the fall.

[investmd]

Longleaf (Southeastern) filed their Q1 13-F: http://www.rocketfinancial.com/Holdings.aspx?id=277&fC=1

 

Not too many major changes but they bought Belmond, sold out of RYN and TRCO and sold almost all of their RL and DD.

 

I thought they bought in to Fairfax in a big way, but why is it I don't see FFH listed in above link of holdings? Did they buy in after Sept 30, 2017? The 3Q letter discusses Fairfax as being undervalued by the market...

 

[educatedidiot]

Form 13-F only requires the disclosure of US securities -- which would exclude Fairfax.

[investmd]

educatedidiot,

Thank you for the clarification. Much appreciated.

Best,

 

[stahleyp]

From inception to yesterday.

 

All pretax numbers. $10,000 invested in LLPFX is worth about $205,000 vs about $204,000 in S&P 500. According to morningstar the after tax returns take almost 2% off annually.

 

In June of 2007 the numbers are about $153,000 in LLPFX and $82,000 for S&P 500.

 

If you run an index fund with these number (VFIAX) you come out with about $195,000.

 

Running longleaf against the S&P 500 isn't 100% fair since they used to deal with a lot of small and mid caps so if we run it against Vanguard Total Stock we're at roughly $114,000 for LLPFX and $123,000 for total market.

[stahleyp]

Well, now it's official. LLPFX has underperformed the S&P 500 after 30+ years (before taxes!).