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LONGLEAF PARTNERS FUNDS'
MASON HAWKINS, C.T. FITZPATRICK & STALEY CATES
(continued from preceding
page)
Hawkins: The situation at Waste Management today is no different than the situation that we had two years ago in the cable TV business. Every analyst in New York said that cable TV was not of interest. And that's when we took a 9% or 10% stake in MediaOne. We bought that stake at $21 or $22 per share. The stock declined to $17. And we had a conference call like this where everybody questioned that position. Two years hence, the stock's at $70.
And it's not a question of clairvoyance. It was a question of valuing the business. Our appraisals are our anchor to windward. It's what everything depends on here. Again, the price tells you nothing about the company's underlying value. The price in the long run will tell you something about the long-term value of the business you own. But in the short run, the price is a very evanescent and changing phenomenon of supply and demand and greed and fear.
But if you didn't have that volatility - if you didn't have that swing of psychological demand and supply - you wouldn't get a chance to buy MediaOne at what was about 35% of appraisal. And you wouldn't have a chance to buy Waste Management today at what we consider to be about 35-40% of appraisal….
FORTUNATELY, OURS AREN'T.
Are Waste Management insiders buying? No. They can't.
Shareholder: Some months ago, a questioner pointed out that a number
of insiders were selling their shares of Waste Management at $55 or $60 per share. And I think your
response was that they were being smart - because it had reached appraised value.
Given the huge price decline, have the insiders at Waste Management been
buying back their shares as aggressively as they were being sold?
Hawkins: That's a very good question - and one that we would want to explore with them. Right now, insiders at Waste Management are not permitted to buy shares - and they haven't been permitted to buy shares, since, say, July because of underlying concerns about various issues. That freezes them out of being buyers at this juncture.
Given sufficient conviction, we can be pretty concentrated.
Shareholder: Your fax says that Waste Management now accounts for
14.6% of your portfolio. What is the maximum percentage that any individual equity will represent
in Longleaf Partners Fund?
Page 7 of 12
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