Longleaf Partners Fund Q4’18 Investor Letter

Longleaf Partners Fund, a suite of mutual funds and UCITS funds managed by Southeastern Asset Management, declined 20.67% in the fourth quarter, taking its 2018 return to a loss of 17.98%. The S&P 500 Index fell 13.52% in the final three months and ended the year down 4.38%.

According to the fund’s letter, four primary challenges impacted its absolute and relative returns in 2018.

“First, our investment in companies based outside of the U.S. hurt performance, even though many of them have significant U.S. segments. The strong dollar was a headwind, and U.S. stocks outperformed those based elsewhere, despite the large fourth quarter U.S. decline. Second, we were too early investing in several of the Fund’s more recent purchases. While we averaged into General Electric (GE), Mattel and Affiliated Managers Group (AMG), these stocks are currently trading well below our average costs. Third, we owned five companies externally categorized in the Industrials sector. These are diverse businesses with very different factors driving results, but they collectively impacted the Fund’s return as the Industrials sector was among the worst performing areas of the market. Fourth, the strong investor preference for momentum-driven growth stocks, where we have limited exposure, continued to negatively impact undervalued businesses’ prices,” states the letter.

During the year, Longleaf sold three investments, added five new qualifiers and increased its stakes in three others.

You can download a copy of the fund’s Q4 investor letter here.