Copycats rejoice
DAVID BERMAN
RTGAM






Copycats are scrambling this week to find out what many of the world's big-shot investors have been up to in the fourth quarter. That's because large investors are required to file changes in their holdings every quarter with the Securities and Exchange Commission, giving smaller investors a peak at the moves of the gurus, including Warren Buffett, George Soros, William Ackman and John Paulson.

However, whether you are looking for some inspiration or just want to steal some ideas, it's always worth looking at another, lesser-known source of brilliance: Southeastern Asset Management. The two big-shots here are Mason Hawkins and Staley Cates and their three funds - Longleaf Partners Fund, Longleaf Partners Small-Cap Fund and Longleaf Partners International Fund - have walloped their benchmarks in just about every time period, including 2010.

They take a so-called price-to-value approach when sizing up stocks, steadfastly limiting their investments to stocks that trade at a significant discount to their intrinsic value. Last year was a particularly busy year for the managers, in terms of holding changes, selling 12 companies and scaling back holdings on another 26 - usually because share prices increased.

But even with the backdrop of rising stock market indexes, the managers continue to see buying opportunities, adding 16 new names and bulking up on 20 existing holdings. Here are a few of their more interesting recent thoughts and adjustments, outlined in their recently released quarterly reports. Just keep in mind that some of these share prices have already moved higher, making copycat moves potentially dangerous.

They remain bullish on Dell Inc. : "Although many focus on the small consumer portion of Dell to evaluate the company's prospects, strategic advantage and future growth are tied to Dell's distribution strength which allows it to sell fast growing servers, storage, and services to small and mid size business as well as government and healthcare customers. While the company repurchased discounted shares in the year, much larger opportunity exists to do more. Michael Dell increased his own personal stake in the company by $100-million in December. Dell's adjusted free cash flow yield is over 20 per cent and the top line is growing, yet the market multiple on the stock implies a business in decline."

Bought Vail Resorts Inc. : "The company has several developments that currently are being sold and will benefit earnings in the near term. Their recent acquisition of Northstar-at-Tahoe is already reaping synergies with nearby Heavenly by growing season pass sales for both mountains. Since our purchase in October, the stock is up almost 40 per cent."

Bought HRT Participacoes em Petroleo S.A., a Brazilian oil and gas company: "The exhaustive [pre-initial public offereing] review process confirmed that HRTis a leading independent geophysical exploration and production company in Brazil with world class concessions in the Brazilian Solimoes Basin and in Namibia. CEO Marcio Mello, one of the leading geochemists in the world, came from Petrobras and has put together a team of smart owner-operators with proper incentives. The price has appreciated 40 per cent since our initial purchase...."