1. Lumen Technologies, Inc. (NYSE:LUMN)
Southeastern Asset Management’s Stake Value: $808,886,000
Percentage of Southeastern Asset Management’s 13F Portfolio: 13.57%
Number of Hedge Fund Holders: 39
Lumen Technologies, Inc. (NYSE:LUMN) is the largest holding in the fourth quarter portfolio of Mason Hawkins’ Southeastern Asset Management. The hedge fund owned 64.45 million shares of the company in Q4 2021, worth $808.8 million, representing 13.57% of the total 13F portfolio. Lumen Technologies, Inc. (NYSE:LUMN) is an American technology and communications company, offering integration solutions and services under the Lumen, Quantum Fiber, and CenturyLink brands.
Lumen Technologies, Inc. (NYSE:LUMN) posted its Q1 results on May 4, reporting earnings per share of $0.59, beating market estimates by $0.14. The $4.68 billion revenue missed Street forecasts by $5.54 million.
Among the hedge funds tracked by Insider Monkey, 39 funds were long Lumen Technologies, Inc. (NYSE:LUMN) at the end of Q4 2021, up from 25 funds in the preceding quarter. The total stakes owned in the fourth quarter amounted to more than $1 billion, compared to $941.3 million in the last quarter.
Here is what Longleaf Partners Global Fund has to say about Lumen Technologies, Inc. (NYSE:LUMN) in its Q4 2021 investor letter:
“In a year that saw various times when the stock market acted like the pre-COVID, during-COVID and post-COVID “environments” (not necessarily in that order), the good news was that our two largest holdings – which we feel can thrive in all three of these environments – Lumen and EXOR, were among our top contributors for the year. We believe that both remain underappreciated by the market and offer significant upside from today’s discounted prices.
Lumen (40%, 3.06%; 3%, 0.31%), the global fiber company, was the top contributor for the year. CEO Jeff Storey took two actions this year to substantially increase the business’s value and address the stock’s enormous discount (it trades below 35% of our appraisal value). First, during the third quarter, Lumen sold its Latin American fiber for a good price [9x earnings before interest, taxes and depreciation (EBITDA)] and the weaker half of its US consumer business for an encouraging 5.5x EBITDA. Both multiples came in above our appraisals and demonstrate how cheap the consolidated Lumen RemainCo is today at less than 6x P/FCF and EV/EBITDA. The majority of Lumen’s remaining EBITDA comes from its US Enterprise and Small and Medium Business (SMB) segments, which grow faster than Lumen’s disposed LatAm fiber and are worth higher multiples. The weakest segment of the new Lumen, the western half of Consumer, is superior to the assets the company just sold for 5.5x EBITDA. Second, Storey quickly repurchased 7% of Lumen’s shares, adding meaningfully to value per share and free cash flow per share. When the dispositions close, proceeds will reduce debt meaningfully, putting net debt right at the company’s leverage ratio target even though that target was based on the prior, inferior business mix. We are pleased that our engagement since filing an amended 13D helped the company begin to deliver positive corporate actions. The market has fixated on the potential for another dividend cut, but Lumen’s FCF is more than sufficient to cover the $1/share payout while investing aggressively into high-return, edge-out capex to grow revenues.”
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