WWII 060: O. Mason Hawkins of Southeastern Asset Management, the Southern Value Investor, When to Sell at a Loss, Options and Stock Splits, $GS Says Reforms Delayed

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Main Topic: Mason Hawkins of Southeastern Asset Management

Otis "Mason" Hawkins is a noted value investor and the Founder, Chairman and Chief Executive Officer of Southeastern Asset Management, Inc. He has been in the investment business for more than 40 years.[1] In 1975, Hawkins founded Southeastern Asset Management, a $35 billion employee-owned, global investment management firm and the investment advisor to the Longleaf Partners Funds, a suite of mutual funds and UCITS funds.

Professional History

Hawkins was Director of Research at First Tennessee Investment Management (1974–1975) and Director of Research at Atlantic National Bank (1972–1973), prior to founding Southeastern. He received a B.A. in Finance from the University of Florida in 1970 and an M.B.A. in Finance from the University of Georgia in 1971. Hawkins also holds the Chartered Financial Analyst (CFA) designation.[1][5][6]

In 1975, Hawkins founded Southeastern Asset Management and later launched the Longleaf Partners Funds, a suite of mutual funds and UCITS funds, in 1987.[4][7]

Investment Strategy

Mason Hawkins is a value investor. When considering prospective investments, he looks for three criteria: strong businesses with good people, at deeply discounted prices.

Hawkins invests in businesses with solid balance sheets. He looks for businesses that trade at far below intrinsic value and have a capable management team, which are important factors for long-term success. His firm, Southeastern Asset Management, has concentrated portfolios with 18-22 stocks usually.

[In 2010] It’s very difficult to find a long-term investor today, and we believe that’s beneficial to us. The average holding period on the New York Stock Exchange has dropped to 6 months from 5 years, 30 years ago."

Mason Hawkins
Southeastern Asset Management

We believe that buying securities at large discounts to conservative appraisals provides the best route to average compounding.

Mason Hawkins
Southeastern Asset Management

We like to buy a business at what we conclude is half its real hard value. At the least, we're looking for a 40% discount.

Mason Hawkins
Southeastern Asset Management

Ask JB: When Should I Sell at a Discount?

[–]not_listed 1 point 1 day ago

When to sell at a loss?

I hold a position on two symbols that have been in the negative for a while:

  • An energy ETF
  • GoPro stock

I've always been disciplined about not panicking and selling off when things are rough, but the energy ETF is going on 3 years down over 20%. GoPro meanwhile needs a miracle to rebound (I'm down like 80%).

Should I be thinking about selling rather than waiting for a rebound? If I do sell, is there a strategy as to when for tax purposes?

If it makes a difference, I don't urgently need the money - I have positions with other symbols doing well or at worst holding steady. I just wonder how many years do I hold on to losses.

JB Says: First, we need to figure out why you got into these positions in the first place. If you got into them as a trade, and the trade went against you, and you decided to hold on to them, you changed the reason for being in those positions in the first place and made a typical beginner type error.

On this podcast, I suggest staying away from trading for this exact reason. Traders have to underlying reason for owning a stock, they look at it as just a graph on the screen so when the trade goes against them, it's up to their sell discipline to get them out of it, and it's this discipline that fails.

Second, you should figure out why the price of what you own has fallen. Is it due to temporary issues with the underlying stock, or portfolio in the case of the ETF? Or is there something that has changed permanently that has impacted the value of the underlying.

If you determine that the change is permanent, you should sell strategically and use the loss to offset realized gains at tax time. If the change is temporary, give yourself a time-frame to wait and then sell if you waited long enough and the temporary issue did not resolve. There is much more to the sell discipline, but these guidelines are a good start.

Ask jb: [–]TheChickening 1 point 13 hours ago

What happens to calls for a 700$ stock for 1000$ in 2019 when the stock does a split in 2018?

The option becomes split adjusted and represents the same overall value. If the stock splits 5 for one, you would end up with 5 calls for $200.

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News: $GS Say Health Care and Tax Reform Delayed until 2018


Thoughts on this podcast? Disagree with me on some point? Something I missed? Leave a comment!

About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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