The Longleaf Small-Cap Fund is well positioned to gain ground over the next five years even amid slow global growth, Mason Hawkins and Staley Cates said in their third-quarter letter to shareholders.
"We expect our investments to do over the next five years without a tailwind from meaningful economic growth," they wrote. "Most of our companies are market leaders with competitive advantages that should enable some degree of pricing power as well as unit growth. Just as important, almost all of our management partners have the operational skills, capital allocation discipline and proper incentives to drive value per share growth."
Many management teams recently have purchased additional shares in their companies, which further aligns their interests with shareholder interests, Hawkins and Cates noted. They also said they will push portfolio companies to ensure that managements and boards of directors continue to act in the best interests of shareholders.
Click here to read their full letter.
For the quarter, the Small-Cap Fund returned 4.97 percent, slightly trailing the Russell 2000 index return of 5.25 percent. For the year to date through Sept. 30, the fund gained 18.79 percent, ahead of the index gain of 14.23 percent.
Longleaf Small-Cap is a component of the Bradway Strategic Portfolio, which consists primarily of investments with top money managers.
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