Sunday, February 25, 2007

Mason Hawkins on 2006

A couple of months ago, I wrote an article on this blog about Mason Hawkins and his deep commitment in running his three funds at Longleaf as a true partnership between the managers and investors. Let me re-post the first two Guiding Principles of Longleaf:

1. "We will treat your if it were our own."

2. "We will remain significant investors with you..."

Mason Hawkin's Annual Letter to Partners has just come and I wanted to share some highlights. (read the whole thing at It's a wonderful document and truly reflects how managers should communicate with their investors)

Here's Mr. Hawkins take on 2006 and the investing climate in general:

We have no view on what markets will do, but this environment presents a challenge as we enter 2007. There are few available bargains as we look for new opportunities to strengthen the foundation for compounding over the next five years. The domestic “on deck” list of potential investments is relatively small, but we are buying several new international companies.

Spoken like a true creator of long-term value.

Our long term success has emanated from several core principles:
  • Buy a business with expected value growth
  • Parnter with capable, honorable management
  • Pay a signifcant discount for stocks
  • Invest with a minimum five year horizon, deferring taxes and minimizing transaction costs
  • Charge reasonable fees

What has all of this done for Longleaf under the tutelege of Mason Hawkins? I will let the numbers speak for themselves (results are 10 year annualized returns)

Longleaf Partners Fund - 12.8% vs. 8.4% for S&P 500

Longleaf Small Cap - 14.5% vs. 9.4% for Russell 2000

Longleaf Int'l - 15.5% vs. 8.0% for EAFE

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