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LONGLEAF PARTNERS FUNDS'
MASON HAWKINS, C.T. FITZPATRICK & STALEY CATES
(continued from preceding
page)
And by going to the IRS standard for diversification, technically we can have half our portfolio in 10 companies with no more than 5% in each of those. And then with respect to the other 50% of the assets, we could have as few as two holdings. So in effect, we could own as few as 12 companies - ten 5% stakes and two 25% stakes - without violating IRS standards for diversification.
I doubt that we'll ever get into a situation where we ever have enough confidence to have 25% of our portfolio committed to one company. However, it's possible under IRS guidelines....
MARGIN OF SAFETY ISN'T ABOUT DIVERSIFICATION.
We did add aggressively to UCAR. But we were limited….
Shareholder: Obviously, you folks - and I think we as advisors -
have a lot of conviction in your process. But when one company takes up 15% of your assets, haven't
you introduced a lot of unsystematic risk into the equation that
Graham might take issue with as far
as the margin of safety and the value of diversification?
Secondly, one of the other holdings that you've had in your portfolio for
about two years is UCAR International.
That's a stock, I believe, that you purchased in the
mid-$30s that's had all kinds of management changes, [allegations of] price fixing and lawsuits.
And yet that's a company that's fluctuated widely in value. How do you compare a situation like
that, where the price has fluctuated down to as low as $12-13, [to Waste Management]? Why not have
doubled up on that and done the same thing if you have the same conviction in the fortunes of that
company?
Hawkins: First of all, the values have not fluctuated
|
PORTFOLIO REPORTS estimates the following were
Longleaf Partners Fund's largest equity purchases
during the quarter ended 9/30/99: 1. WASTE MGMT INC 2. GENERAL MOTORS CORP 3. GEORGIA-PACIFIC TIMBER GRP 4. TRICON GLOBAL RESTAURANTS 5. HILTON HOTELS CORP 6. TRIZECHAHN CORP 7. NIPPON FIRE & MARINE INS CO LTD 8. FDX CORP 9. YASUDA FIRE & MARINE INS CO LTD |
that dramatically, but the prices have…. And … we did add aggressively. There's a maximum stake we can have in UCAR.
Cates: They have a poison pill that we're right under.
Page 8 of 12
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