In this article, we will look at the significant positions in small-cap companies of billionaire Mason Hawkins of Southeastern Asset Management. This is very important because mimicking the activity of hedge funds and billionaires by investing in their large-cap picks is not the best strategy for investors. Our tests of a portfolio consisting of 50 of the most popular picks among hedge funds underperformed the market by seven basis points per month between 1999 and 2012. On the other hand, popular small-cap picks have a better chance of helping an investor to beat the market, as our small-cap strategy has, returning 132% from the end of August 2012 through March 11, 2015.
Tennessee-based Southeastern Asset Management was founded in 1975 by Mr. Hawkins and three others. In addition to being the Chairman and Chief Executive Officer of the fund, since 1989, Hawkins has also served as the co-portfolio manager of Longleaf Partners’ Small-Cap Fund. Southeastern Asset Management disclosed an equity portfolio valued at some $17.38 billion as of the end of 2014. The equity portfolio is mainly invested in Financial (26%), Energy (20%), and Consumer Discretionary (13%) stocks.
Southeastern’s latest 13F filing revealed three long stakes in companies with market capitalizations under $2.5 billion, which were ViaSat, Inc. (NASDAQ:VSAT), Vail Resorts, Inc. (NYSE:MTN) and Rayonier Inc. (NYSE:RYN). At the end of 2014, the fund held 3.48 million shares of ViaSat, Inc. (NASDAQ:VSAT), up by 13% during the fourth quarter, the value of the stake amounting to $219.42 million after the stock surged by 14.4% during the October-December period.
ViaSat, Inc. (NASDAQ:VSAT) provides high-speed fixed and mobile broadband services, advanced satellite and other wireless networks, and secure networking systems, products, and services worldwide. Revenue slightly increased by 0.3% in the third quarter of 2014 when compared to the same quarter one year prior, to $333.55 million from $332.56 million. Along with this, earnings per share (EPS) significantly increased in the third quarter to $0.31 from -$0.13.
Recently, ViaSat and Boeing Co (NYSE:BA) announced a global satellite broadband network, the ViaSat Flexible Broadband System, which will offer a more flexible, high-capacity, and affordable service to providers. Chiefly, the deal will allow service providers to start with a smaller investment. It will also help to match the bandwidth demand in their markets, and scale their infrastructure as expansion occurs. Baupost Group and FPR Partners were two large shareholders of ViaSat, Inc. (NASDAQ:VSAT), holding 11.53 million shares and 4.12 million shares respectively at the end of 2014.
Vail Resorts, Inc. (NYSE:MTN) is next on the list, with Southeastern Asset Management holding 2.39 million shares, down by 7% from the previous quarter. The value of the stake amounted to $217.87 million. Meanwhile, the stock price of the real estate and resort operator rose by about 6.9% in the fourth quarter of 2014.
Days ago, the company saw its shares rise about 10% in one day due to its strong second-quarter profits. The gross profit margin for the second quarter of fiscal 2015 increased to 37.36%. Furthermore, revenue increased in that quarter due to the growth in season-pass sales and spending in meals and dining. As a matter of fact, net income almost doubled in the second quarter of 2015 from the same quarter of fiscal 2014, to $115.76 million from $59.26 million.
Richard Mcguire’s Marcato Capital Management was the second-largest shareholder of Vail Resorts, Inc. (NYSE:MTN), with no activity on the quarter but with a stake of 1.69 million shares valued at $153.83 million at the end of 2014. The position accounted for over 5% of the fund’s equity portfolio. Another prominent investor with a large position in terms of percentage of its portfolio was Patrick Gideon Wolff’s Grandmaster Capital, with a position of 165,800 shares, 6.85% of its equity portfolio.
Finally, Rayonier Inc. (NYSE:RYN) completes the list, with Hawkins holding a position of 7.77 million shares at the end of 2014. The fund’s stake had a market value of $217.23 million and accounted for 1.24% of Southeastern’s equity portfolio. However, Rayonier Inc. (NYSE:RYN)’s stock lost about 33.6% in 2014 and 10.3% in the October-December period, while Mr. Hawkins added 1% to his portfolio according to the latest filing. Moreover, Rayonier Inc. (NYSE:RYN)’s shares have lost another 2.5% of their market value in 2015.
On March 2, the company announced that the board of directors has declared a first quarter cash dividend of $0.25 per common share, which will generate an annualized dividend of $1.00 per share. Based on a closing price of $27.31 on Monday, this makes an annualized dividend yield of 3.7%. Apart from Mr. Hawkins, the largest shareholder of Rayonier Inc. (NYSE:RYN) was Martin Whitman’s Third Avenue Management, as it reported holding 2.52 million shares valued at $70.49 million, an increase of 356% to its position during the fourth quarter.
Disclosure: None
