Mason Hawkins' Southeastern Asset Management is out with 2012 shareholder letter. Hawkins has been in the news lately over his oposition to the Dell LBO, but he does not comment on that in the letter (for legal reasons or that he is not typically a vocal activist). Mason Hawkins has some very interesting remarks on why macro investing is difficult/impossibly. Hawkins notes that if he had waited for signs of a recovery before investing, the value firm would have missed out on gains of up to 90%. The excerpt followed by the full letter in scribd can be found below:
Most holdings posted solid 2012 returns. The largest contributors were among our most disdained in 2011. In particular, our cement and aggregates companies illustrated why conservative business appraisals, not short-term price movements, should dictate investment decisions, as these stocks sharply rebounded without improvement in global GDP growth or overall industry volumes. In the third quarter of 2011, when macro fears about global growth and sovereign debt caused stocks to tumble, cement companies were among the worst performers as the timing of a construction rebound grew more uncertain. We did not know when infrastructure, housing, and commercial building investment would turn, but we felt confident that over five years, our companies' unit sales and pricing would improve. We could adopt a longer time horizon because we had a meaningful margin of safety in the discount placed on cement plants and rock quarries – they sold for far below replacement cost and recent comparable sales. Had we waited for more certainty about recovery and less recession fear, we would have missed the 66-90% gains in our core cement holdings and 30+% appreciation in our aggregates companies over the last year as prices moved to more fully reflect asset values.