In the first quarter of 2024, the Longleaf Partners Fund delivered a return of 6.60%, outperforming its annual return target of inflation plus 10%. This positive performance was primarily driven by strong stock performance in the portfolio, despite headwinds faced by value investing strategies relative to growth strategies. The fund’s overweight position in Communication Services, higher cash holdings, and lack of exposure to Information Technology contributed to its relative underperformance. However, the portfolio’s focus on companies with strong fundamentals and value creation, such as Fidelity National Information Services and CNX Resources, contributed to its positive return.
The fund’s top contributors in the quarter were Fidelity National Information Services, CNX Resources, FedEx, Hyatt, and RTX. These companies demonstrated strong growth in value per share and implemented value-enhancing actions such as share buybacks. Conversely, the fund’s bottom performers included Liberty Broadband, Warner Bros Discovery, Warner Music Group, Fortune Brands, and IAC. These companies faced challenges related to subscriber growth, advertising revenue, and competitive pressures.
During the quarter, the fund initiated one new position and added to four existing positions. It exited two holdings and trimmed several strong performers. The new position was in an industry where the fund has a history of success and is encouraged by recent personnel changes. The fund exited its positions in Fairfax Financial and Fortune Brands, citing valuation concerns and a shorter holding period, respectively.
As of the end of the quarter, the fund’s cash position stood at a higher-than-usual level of 16%. The research team continues to identify potential investment opportunities, and the fund’s price-to-value ratio remains in the high-60s. The fund’s management remains committed to its investment discipline and emphasizes the importance of sticking to its principles in a fully priced market.
Overall, the Longleaf Partners Fund’s performance in the first quarter of 2024 reflects the fund’s focus on value investing and its ability to identify and invest in companies with strong fundamentals and value creation potential. The fund’s management remains optimistic about the future and is confident that its investment discipline will continue to deliver positive results for investors.
