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LONGLEAF PARTNERS FUNDS'
In our December 29, 1998 edition, we told you that founder
Mason Hawkins and some of his key
associates were downright excited about some of the opportunities that they'd been finding and buying.
Well, this year, it's deja vu all over again. With flagship fund
Longleaf Partners and
Longleaf Realty Fund
both down more than 15% during the second half of 1999,
Hawkins and several of his key
associates - Staley Cates,
C.T. Fitzpatrick and
Lee Harper - sounded as excited about the securities
that they were finding and buying as we've ever heard them. Therefore, naturally, we wanted to share
their thoughts with you.
The excerpts which follow were excepted from their remarks and from their answers to shareholder
questions during their most recent client conference call - which occurred in late October. We hope
that you find some of their ideas and insights as intriguing as we do.
"As long as the earnings power of his holdings remains satisfactory, the investor can give as little
attention as he pleases to the vagaries of the stock market. More than that, at times he can use
these vagaries to play the master game of buying low and selling high.
Page 1 of 12
MASON HAWKINS, C.T. FITZPATRICK & STALEY CATES
"BOUTS OF MARKET FEAR AND COMPANY SHORTFALLS
HAVE CREATED COMPELLING OPPORTUNITIES."
Accounts managed by
Southeastern Asset Management,
the advisor to Longleaf Partners Funds, handily
outperformed just about any index you might want to consider during the 19 years ended December 31,
1998 - earning a compound return of 19.5% per year versus 17.7% and 14.8% per year for the S&P 500
and the Ibbotson Small Company Index, respectively, during that same period.
From a stock-picking perspective (their equities-only returns before fees), their performance was
more impressive still - 21.0% per year compounded over the same period. (All figures provided by
Southeastern Asset Management.)
RATHER THEY'RE AN OPPORTUNITY TO BUY MORE.
For the true investor, price fluctuations are an opportunity.
Mason Hawkins: We feel very fortunate to have intelligent, long-term partners who understand that
increased price volatility produces very salutary benefits for the patient and disciplined long-term
value buyer.
We'd like to quote some of
Ben Graham's comments from The Intelligent Investor about price
volatility. We've taken some of his quotes from Chapter 8 and put them together. As
Graham states:
"The investor who permits himself to be stampeded or unduly worried by the unjustified market
declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.
Price fluctuations have only one significant meaning for the true investor. They provide him with
an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great
deal."
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