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Billionaire Mason Hawkins’ Top Stock Picks

Mason HawkinsSoutheastern Asset Management revealed its holdings in a regulatory filing. The investment manager has a 13F portfolio of $15.93 billion as of the reporting period. The fund’s 13F portfolio is mainly focused on finance, energy and consumer discretionary companies. Hawkins has maintained his top positions in Level 3 Communications, Inc. (NYSE:LVLT), Loews Corporation (NYSE:L), CONSOL Energy Inc. (NYSE:CNX), McDonald’s Corporation (NYSE:MCD) and Chesapeake Energy Corporation (NYSE:CHK) with slight changes over the first quarter. Before launching his investment firm in 1975, Hawkins worked as a director of research at Atlantic National Bank and First Tennessee Investment Management between 1971 and 1975. Southeastern Asset Management is an employee-owned investment management firm and it manages funds of Longleaf Partners. Assets under management of Southeastern Asset Management was $34.5 billion in which $17.4 billion invested in US Large Cap Equities, $4.5 billion invested in US Small Cap Equities, $10.3 billion invested in Global Equities and $2.3 billion invested in Non-US Equities as of June 30, 2014. Mason Hawkins’ Southeastern Asset Management recently has filed its 13F with the SEC for the reporting period of March 31.

Mason Hawkins

 

Insider Monkey has a research team directed by Dr. Ian Dogan who has a Ph.D. in financial economics with a specialization in insider trading. Our research team is closely following more than 700 hedge funds and other investment managers including Mason Hawkins’ Southeastern Asset Management. Our research has shown that hedge funds are extremely talented at identifying undervalued stocks especially in the small-cap space. The 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. We have also been tracking the performance of these stocks in real time since the end of August 2012. These stocks returned 143.7% through May 15th and has beaten the S&P 500 ETF (SPY) by over 80 percentage points (see the details here).

Coming back to Southeastern Asset Management’s top stock picks in its 13F portfolio, the top spot was occupied by Level 3 Communications, Inc. (NYSE:LVLT) with the fund owning 45.24 million shares valued at $2.44 billion constituting 15.29% of the total 13F portfolio of the fund. Hawkins has reduced the position in the company by 9.50 million shares during the first quarter. Level 3 Communications, Inc. (NYSE:LVLT) is a $19.67 billion integrated telecommunications services provider.

Level 3 recently signed lone agreement of $2 billion at Libor plus 2.75% which replaced former loan which was priced at Libor plus 3.5%. After acquiring TW Telecom in last quarter of 2014, Level 3 recently announced financial results for the first quarter of 2015 which is the first reportable quarter after acquisition. Revenue of core network services of the company increased by 6% year-over-year excluding foreign exchange effects. Free cash flow of $51 million and adjusted EBITDA of $635 million are other highlights of the quarter. Total revenue for the first quarter increased to $2.05 billion in 2015 from $2.00 billion in 2014. Net income of first quarter increased to $122 million in 2015 from $99 million in 2014. Jim Simons’ Renaissance Technologies and Keith Meister’s Corvex Capital are other major shareholders of the company. Corvex Capital has decreased its position in the company by 75.88% during the first quarter and reported owning 1.08 million shares of Level 3 Communications, Inc. (NYSE:LVLT) valued at $58.29 million at the end of first quarter of 2015.

The second-largest holding is represented by Loews Corporation (NYSE:L), in which Southeastern Asset Management held 33.65 million shares worth $1.37 billion at the end of the first quarter. Loews Corporation is a property and casualty insurance company with a market cap of $15.09 billion and P/E ratio of 19.17. Loews Corporation (NYSE:L) recently announced dividend payment of $0.0625 per share, payable on June 12. The company’s first quarter net income from continuing operations reported as $109 million in comparison with the last year’s quarterly income of $265 million. The decline in the operating income is mainly because of impairment charge of $158 million at Diamond Offshore. Boykin Curry’s Eagle Capital Management and Martin Whitman’s Third Avenue Management are other prominent investors who held position in Loews Corporation (NYSE:L) at the end of first quarter.

CONSOL Energy Inc. (NYSE:CNX) is the third largest position of Southeastern Asset Management according to its most recent 13F file. Southeastern Asset Management has bought 12.19 million shares of the company and increased its position to 44.95 million shares of Consol Energy valued at $1.25 billion at the end of first quarter. CONSOL Energy Inc. (NYSE:CNX) is a $7.33 billion coal and natural gas producer for electric generation and steelmaking companies. David Einhorn’s Greenlight Capital is also bullish about CONSOL Energy Inc. (NYSE:CNX). Greenlight Capital increased its position in the company by 7.37 million shares and reported owning 20.58 million shares valued at $574 million at the end of first quarter.

McDonald’s Corporation (NYSE:MCD) comes at number four in terms of the top stock picks of Southeastern Asset Management in its 13F portfolio. The current position of the investment manager includes 10.85 million shares of fast food restaurants operator and franchiser, with a market value of $1.06 billion. To protect its market share, McDonald’s Corporation (NYSE:MCD) simplified its drive-through services and added some new sandwiches to its existing menu. McDonald’s is also planning to enrich its beverage menu this summer. First Eagle Investment Management is another major shareholder of the company with its investment of 5.92 million shares of McDonald’s Corporation (NYSE:MCD) valued at $576.42 million at the end of first quarter of 2015. Daniel S. Och’s OZ Management invested in the company via its call options of 2.46 million shares valued at $239.24 million at the end of first quarter. OZ Management has reduced its call options by 51.16% during the first quarter.

The final top pick of Southeastern Asset Management in this article is Chesapeake Energy Corporation (NYSE:CHK). The fund disclosed owning 64.20 million shares, down from 73.87 million shares held previously. At the time of reporting, the value of the stake was $909.08 million. Besides Southeastern Asset Management, another prominent stockholder of the company is Carl Icahn’s Icahn Capital, which held 2.27 million shares of Chesapeake Energy Corporation (NYSE:CHK) according to its latest filing. Carl Icahn initiated his last activist position in the company at the beginning of 2012 and become successful by not only taking the control over the board but also eliminating founder and CEO Aubrey McClendon. Chesapeake Energy Corporation (NYSE:CHK) currently has legal battle with Ex-CEO Aubrey McClendon who is blamed to transfer company’s confidential data and maps of oil and gas prospects to American Energy Partners.

Disclosure: None

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