Mason Hawkins third quarter letter to shareholders. We are pleased to report that Southeastern delivered one of our strongest absolute return quarters across the Longleaf Fund family in 3Q as almost all of our holdings appreciated. Only the Small-Cap Fund, which had a large cash position, did not exceed its benchmark index in the quarter. One year returns were well ahead of our annual absolute goal of inflation plus 10%. The Partners and International Funds also substantially outperformed their benchmark indices over the last twelve months. Each of the four Longleaf Funds has beaten its respective index since inception.

Mason Hawkins

Mason Hawkins

The common theme in our strongest contributors in the quarter was that they illustrate the meaningful impact that good management can have. Our newly installed CEOs have shown quick results. Doug Lawler at Chesapeake Energy Corporation (NYSE:CHK) implemented significant cost cuts, lowered capital spending, and sold non-core assets. Jeff Storey at Level 3 reduced costs and focused on adding more profitable customers. Marcelino Verdes at Hochtief sold both the airport and services businesses for attractive prices. Our longstanding partners also made smart operating and capital decisions to build value during the quarter. Frans van Houten at Philips completed a large buyback at discounted prices and continued delivering higher margins that approached year-end targets.

Brett Harvey at CONSOL Energy pursued an asset rationalization plan that will fund higher gas production. Vittorio Colao sold Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s stake in Verizon Communications Inc. (NYSE:VZ) at a compelling price. Don Graham at the Washington Post sold the namesake newspaper at a 25% premium to our appraisal. Emil Brolick successfully sold 30 The Wendy’s Co (NASDAQ:WEN) and encouraged more franchisees to fund the accretive store revitalization strategy. The actions of these CEOs contributed meaningfully to our successful quarter.

In contrast, Michael Dell put his personal gain above other shareholders’ interests and eventually won approval of a management buyout well below the value of Dell Inc. (NASDAQ:DELL)’s free cash flow and assets.

Mason Hawkins Q3 Letter