Klaus Vedfelt
Fund Traits
P/V Ratio
Excessive-50s%
Money
7.8%
# of Holdings
21
Click on to enlarge All information as of March 31, 2025
Annualized Whole Return
1Q
1 12 months
3 12 months
5 12 months
10 12 months
Since Inception
(%)
(%)
(%)
(%)
(%)
(%)
International Fund
-2.21
-0.30
2.16
9.73
4.21
4.91
FTSE Developed
-1.47
6.78
7.39
15.85
9.35
10.24
FTSE Developed Worth
5.48
7.56
6.29
14.04
7.01
7.96
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Inception date 12/27/2012. FTSE Developed Worth Since Inception return is gross, as internet return for that interval will not be accessible. All different efficiency figures above are internet returns.
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Whereas our inventory value efficiency was near the risky index by quarter finish, our confidence in potential returns grew because the quarter progressed. We’re invested in what we consider to be high quality corporations that may thrive in turbulent occasions. This resilience was demonstrated by our portfolio materially outperforming the index for the reason that market peak on Feb nineteenth. Our underlying worth per share progress exceeded our inventory value efficiency within the quarter.
Efficiency within the first half of the quarter was impacted by a cluster of corporations with over 10% inventory value strikes: Bio-Rad (BIO), CNX (CNX), FedEx (FDX), Glanbia (OTCPK:GLAPF)(OTCPK:GLAPY) and Mattel (MAT) (Mattel had good outcomes and the share value went up, however the outcomes weren’t 10%+ good in our view). This group had a internet destructive ~250bps (foundation factors) efficiency impression within the quarter. This impression will be overcome with higher outcomes because the yr goes on, as we focus on on a number of holdings beneath. Whereas we personal corporations which might be comparatively boring and rising free money circulation (FCF) per share over the long run, we will nonetheless have some bumps alongside the way in which to worth realization. A few of these short-term, inventory value disappointments within the quarter got here from earnings experiences, whereas others have been pushed by geopolitical uncertainty.
We wrote within the annual letter how we thought Trump 2.0 can be completely different than Trump 1.0. To date, that has been the case. As we kind this letter, there may be a lot uncertainty about the place issues are going. On the one hand, doomsayers consider this could possibly be the start of a reordering of the world in a approach that leaves everlasting marks, very like how OPEC’s actions within the early Nineteen Seventies ushered in a tough ten years that resulted in a single digit PE a number of for many markets within the early Nineteen Eighties. However, optimists would recommend (extra cautiously recently) that there’s a plan at work, thus the inventory market ache to this point has been self-inflicted and is shortly reversible. In occasions like these, it’s good to take a breath whereas reassessing our portfolio versus the market. We nonetheless consider that is setting as much as be a greater surroundings for worth inventory selecting, the place nimble corporations on offense are rewarded and the most important corporations within the index don’t proceed to go straight up. Whereas we have been down within the instant days following “Liberation Day,” it was encouraging to see our portfolio considerably outperform the index at that time, on high of the outperformance within the second half of the primary quarter as talked about above. This can be a famous distinction to our underperformance within the world monetary disaster, Covid or 2022 however extra in-line with how we did within the early days of the market flip in 2000. We’ve labored to enhance our portfolio administration to have extra balanced weightings throughout corporations on offense, which we now firmly consider now we have within the portfolio.
It was a very good time to be underweight the traditionally excessive US weighting within the world index. The index was additionally damage by its IT obese within the quarter, which was comparatively good for us. Nevertheless, it was helped by the “BBOPs” (Large Banks/Oils/Prescribed drugs), which created a relative headwind for us, particularly versus the worth index. In a market that’s ETF-driven within the quick time period, we will see how preliminary steps away from progress favorites might first favor the BBOPs which might be larger weights in worth ETFs. We usually personal fewer of those corporations than the index or the common worth supervisor as a result of we don’t consider they’re high-quality sufficient on enterprise or folks. Moreover, two out of those three are economically delicate: financial institution earnings in whole won’t develop in a recession, and oil costs additionally usually correlate with financial exercise. This confirmed by means of within the post-Liberation Day outperformance for our portfolio talked about above. We did enhance our healthcare weighting within the quarter, however this was executed in a focused approach specializing in high-quality companions which might be on offense.
What is going to matter most in your potential returns is how every of our particular person holdings performs. We are going to now discuss by means of a number of the extra notable holdings within the quarter.
Notable Contributors & Detractors
Albertsons (ACI) – US grocery retailer Albertsons was a contributor for the quarter. Albertsons was a brand new buy in 2024, after we had adopted the corporate and its predecessors for years. In an in any other case turbulent quarter, Albertsons stands out as a steady enterprise that continues to be undervalued as a result of it had fallen off the radar throughout a protracted deal course of with Kroger that finally failed. The corporate ought to develop at a reasonable tempo and has loads of monetary firepower to repurchase shares, all whereas it has a number of strategic choices (akin to unlocking its actual property worth and/or promoting non-core markets) to comprehend worth per share.
IAC (IAC) – Digital holding firm IAC was one other stable contributor for the quarter. In January, the corporate introduced that former CEO Joey Levin can be shifting his focus to change into Govt Chairman at IAC portfolio enterprise Angi. Barry Diller is taking over a bigger position at IAC whereas persevering with to be its Chairman. Initially, the market reacted cautiously, however because the quarter went on, the potential advantages grew to become clearer, particularly along side the just lately accomplished spin-off of Angi. Through the quarter, we revealed our first Analysis Views word that gives extra particulars on our funding case for IAC.
Millicom (TIGO)(OTCPK:MLCMF) – Latin American telecommunications operator Millicom prolonged its robust 2024 efficiency into the primary quarter of this yr. The corporate reported stable outcomes, exceeding its already twice-raised 2024 fairness FCF steering of roughly $650 million and guiding additional progress to the $750 million vary for 2025. The corporate applied an improved dividend for a yield above 10%, completed itemizing solely within the US and in addition made progress on an accretive deal in Colombia. We’re grateful for the work of our aligned companions at 40%-owner Iliad Group and consider that extra upside stays with the inventory nonetheless buying and selling at a single-digit a number of of rising earnings.
Bio-Rad – Life sciences firm Bio-Rad detracted for the quarter. The corporate stays a steady enterprise with progress potential. The quarter was a narrative of two halves. Early on, trade developments confirmed enchancment after a interval of normalization post-Covid, prompting us to trim on the again of value appreciation. Nevertheless, later within the quarter, information of presidency funding cuts and a disappointing quarter of outcomes weighed on the inventory value. Regardless of this, we stay optimistic about Bio-Rad’s outlook. Educational and authorities spending within the US accounts for under a low-single- digit proportion of this firm’s income, regardless that public notion suggests in any other case. In the meantime, the corporate has a internet money steadiness sheet, a big hidden asset in its Sartorius stake and a confirmed historical past of good capital allocation.
CNX Sources – Pure fuel firm CNX Sources was a detractor for the quarter. Whereas CNX was certainly one of our stronger performers in 2024, it began the yr with a disappointing final result concerning authorities incentives for its coal mine methane fuel seize program. The incentives have been beneath our unrisked upside case that might have helped our price by $10-20/share+. Whereas this was a disappointing few {dollars} per share hit to our risked worth, the silver lining is that each we and CNX have been capable of purchase extra shares at a value that, in our view, doesn’t totally recognize all the opposite good issues occurring on the firm. CNX stays centered on what’s inside its management, leveraging its low-cost construction and disciplined hedging technique to generate FCF in a wide range of value environments.
FedEx – International logistics firm FedEx was a detractor for the quarter. The corporate confronted macro headwinds, together with tariff threats and ongoing demand weak spot within the US. The corporate is rising market share and margins in its previously challenged European enterprise, and this was a driver for the Specific enterprise to report low- single-digit topline progress that become double-digit money circulation progress. The Freight enterprise noticed a decline like its friends who’re additionally wrestling with weak industrial circumstances. FedEx stays on monitor to separate into two entities: Specific and Freight. This cut up ought to present each corporations with larger monetary flexibility and accountability, permitting them to be run extra effectively. The market has persistently undervalued FedEx’s Freight operations, and a big low cost to UPS is now not warranted for the Specific enterprise. Tariff headwinds will probably be difficult to navigate, however we’re glad the corporate is extra on offense now than it has been in earlier downturns.
Glanbia – Irish diet and elements firm Glanbia was a detractor within the quarter. The corporate was unable to cost by means of sufficient enter price inflation resulting from varied elements, which resulted in a 9% downgrade to consensus expectations. The share value fell over 3x that impression. At 9x price-to-earnings (PE), the entire firm now trades properly beneath comparators for every of its segments: Sports activities Vitamin Manufacturers,
Dietary supplements & Elements, and Dairy/Cheese producers. We’ve impressed upon the Board and Administration the necessity to take actions akin to growing share buybacks and exploring a strategic course of to separate and promote sure divisions. We consider the corporate is contemplating such a method, having already introduced a reorganisation into three divisions as a essential precursor to a sale of the brand new Dairy Protein phase, which could possibly be price roughly 50% of the corporate’s enterprise worth (EV) at this time. This would go away top quality model and ingredient companies that may return to progress in combination within the years to return whereas being engaging acquisition targets themselves.
Portfolio Exercise
We initiated one new place within the portfolio through the quarter, a number one healthcare firm with a internet money steadiness sheet and nice owner-partners. We stay up for discussing it in additional element later this yr. We additionally exited two positions, Bollore (OTCPK:BOIVF) and Prosus (OTCPK:PROSY)(OTCPK:PROSF). We selected to focus in probably the most engaging elements of these two holding corporations, with extra Canal+ and Louis Hachette changing Bollore and Supply Hero remaining instead of Prosus. Following quarter finish, within the wake of Trump’s “Liberation Day” bulletins, we’re discovering extra alternatives to proceed upgrading the portfolio’s high quality and margin of security. Our on-deck checklist is rising, and we plan to take motion, in a measured approach, to deploy our money steadiness from quarter finish.
Outlook
We stay enthusiastic about 2025 and past. The companies we personal are making stable operational progress and are well-positioned to go on offense, even because the ripple results of the newly applied tariffs deliver new challenges and uncertainty. Whereas the S&P 500’s 18x next-twelve-months’ price-to-earnings ratio doesn’t look that engaging to us (particularly on earnings that could possibly be too excessive), the Fund’s price-to-value ratio at this time at properly underneath 60% is very engaging. We consider there may be alternative within the portfolio at this time whereas the on-deck checklist continues to develop. Our nonetheless larger than typical money place at quarter finish has been coming down in April as now we have put cash to work with the objective of enhancing our margin of security.
We additionally proceed to take our time reviewing candidates to seek out the best particular person for our subsequent US Junior Analyst and welcome referrals from our consumer associate community. Thanks in your partnership on all fronts. We stay up for speaking because the yr progresses.
Returns replicate reinvested capital features and dividends however not the deduction of taxes an investor would pay on distributions or share redemptions. Efficiency information quoted represents previous efficiency. Previous efficiency doesn’t assure future outcomes. The funding return and principal worth of an funding will fluctuate in order that an investor’s shares, when redeemed, could also be price kind of than their authentic price. Present efficiency of the Fund could also be decrease or larger than the efficiency quoted.
Efficiency information present to the latest month finish could also be obtained by visiting Worth Buyers Since 1975 | Southeastern Asset Administration. The prospectus expense ratio earlier than waivers is 1.35%. The International Fund’s expense ratio is topic to a contractual payment waiver to the extent the Fund’s regular working bills (excluding curiosity, taxes, brokerage commissions and extraordinary bills) exceed 1.05% of common internet property per yr. This settlement is in impact by means of a minimum of April 30, 2025, and is probably not terminated earlier than that date with out Board approval.
Earlier than investing in any Longleaf Companions Fund, it’s best to fastidiously contemplate the Fund’s funding goals, dangers, prices, and bills. For a present Prospectus and Abstract Prospectus, which comprise this and different essential info, go to Longleaf Companions Fund. Please learn the Prospectus and Abstract Prospectus fastidiously earlier than investing.
RISKS
The Longleaf Companions International Fund is topic to inventory market threat, that means shares within the Fund might fluctuate in response to developments at particular person corporations or resulting from basic market and financial circumstances. Additionally, as a result of the Fund usually invests in 15 to 25 corporations, share worth might fluctuate greater than if a larger variety of securities have been held. Investing in non-US securities might entail threat resulting from non-US financial and political developments, publicity to non-US currencies, and completely different accounting and monetary requirements. These dangers could also be larger when investing in rising markets.
The FTSE Developed Index is a market-capitalization weighted index representing the efficiency of enormous and mid-cap corporations in Developed markets. The index is derived from the FTSE International Fairness Index Sequence (GEIS) which covers 98% of the world’s investable market capitalization. The FTSE Developed Worth Index measures the efficiency of the investable securities within the developed massive and mid-cap worth phase of the market, which incorporates corporations which might be thought-about extra worth oriented relative to the general market. The S&P 500 Index is an index of 500 shares chosen for market measurement, liquidity and trade grouping, amongst different elements. The S&P is designed to be a number one indicator of U.S. equities and is supposed to replicate the chance/return traits of the massive cap universe. Indexes are unmanaged, don’t replicate the deduction of charges or bills and can’t be invested in straight.
P/V (“value to worth”) is a calculation that compares the costs of the shares in a portfolio to Southeastern’s appraisal of their intrinsic values. The ratio represents a single information level a couple of holding and shouldn’t be construed as one thing extra. P/V doesn’t assure future outcomes, and we warning traders to not give this calculation undue weight.
“Margin of Security” is a reference to the distinction between a inventory’s market value and Southeastern’s calculated appraisal worth. It’s not a assure of funding efficiency or returns.
Free Money Circulation (FCF) is a measure of an organization’s means to generate the money circulation essential to take care of operations. Typically, it’s calculated as working money circulation minus capital expenditures.
Worth / Earnings (P/E) is the ratio of an organization’s share value in comparison with its earnings per share. EBITDA is an organization’s earnings earlier than curiosity, taxes, depreciation and amortization.
Internet Asset Worth (NAV) is a press release of the worth of an organization’s property minus the worth of its liabilities.
Enterprise worth (EV) is an organization’s market capitalization plus debt, minority curiosity and most popular shares, and fewer whole money and money equivalents.
A Foundation Level is one hundredth of 1 %.
As of March 31, 2025, the highest ten holdings for the Longleaf Companions International Fund: Canal+, 6.4%; IAC, 6.4%; CNX Sources, 6.3%; EXOR, 5.7%: Millicom, 5.6%; Albertsons, 5.5%; FedEx, 4.8%; Mattel, 4.3%; HF Sinclair, 4.1% and Constancy Nationwide Info Providers, 4.1%. Fund holdings are topic to alter and holdings discussions are usually not suggestions to purchase or promote any safety. Present and future holdings are topic to threat.
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Editor’s Notice: The abstract bullets for this text have been chosen by In search of Alpha editors.
