The same fundamental disciplines have guided our approach for over forty years

Our Approach

Southeastern Asset Management has generated strong performance since inception by consistently employing our long-term, concentrated, engaged value investment discipline since 1975. We apply the same in-depth, fundamental company research and rigorous security selection across all strategies. A key to our decades-long success has been our business ownership mindset that underlies our investment criteria of high-quality businesses, run by capable people, trading at a discounted price.

Long-Term: patient, disciplined, intelligent investing

As long-term business owners – not traders or speculators – we can capitalize on the fear and greed that drive short-term market prices by investing with a five-plus year horizon, using objective intrinsic values.

We have maintained our long-term discipline over the nearly five decades, even as time horizons for most investors have moved meaningfully shorter. As long-term, bottom-up, fundamental business appraisers, volatility is our friend and enables time horizon arbitrage. Short-term market price dislocations give us the opportunity to own discounted, high quality businesses run by partners who compound long-term value, which are temporarily out of favor. Because Southeastern is independent and employee-owned and our employees are collectively our own largest client, we can stick to our long-term discipline, even in times when it feels difficult to do so. However, it is not enough to be a long-term investor; you must also have a client base that will think and act long-term. We have aligned ourselves with our clients by investing alongside them in our funds, closing our strategies when it would benefit our shareholders to do so and maintaining an open dialogue over time. We are fortunate to have developed a strong base of likeminded, long-term, aligned clients who have allowed us to successfully pursue our approach for nearly five decades.

In the short run, the market is a voting machine, but in the long run it is a weighing machine.

Benjamin Graham

The Intelligent Investor

Southeastern’s Average Active Share

*Our high Active Share - defined as the percentage of fund holdings that is different from the benchmark holdings - reflects the truly differentiated nature of our portfolios.

Concentrated: enhancing potential returns and minimizing risk

We own what we view as the most qualified 18-22 global investments in each portfolio.

Concentrating allows adequate diversification while providing the opportunity to maximize returns and minimize permanent capital loss. Most research shows that holding 10-12 uncorrelated investments allows for adequate diversification. Owning 18-22 allows us to concentrate in our best ideas while allowing for potential overlapping risk factors or correlations. Concentrating in our best ideas allows our global investment team to form a deep understanding of each business through in-depth research and continual refinement of each case over time. We take a private equity-like approach to vetting each business and engaging on an ongoing basis with our management teams.

Our concentrated approach also applies to how we run our business. We employ a single, consistent investment approach. We understand and stick to our circle of competence and only seed new strategies when we find an opportunity set where we want to invest our own capital that we cannot access in our current funds. We operate a lean organization in a flat, team-driven structure. We have a concentrated research team of generalists across our three research offices. The team is deep and experienced enough to adequately cover the globe but nimble enough to effectively collaborate across borders.

Engaged: applying an ownership mindset

We view our portfolio company management teams and boards of directors as partners, and we constructively engage with them to help drive successful, long-term outcomes, using our global network, size and reputation.

We seek to partner with aligned management teams that have a track record of creating value for shareholders. We approach every investment with a business owner mindset, and we believe it is our fiduciary duty to always keep an engaged dialogue with our management teams and boards of directors. Even in cases where we are fully supportive of management, we are never passive. Our experience and reputation of being a large, long-term, collaborative shareholder gives us access to management and the credibility to share ideas and help effect positive outcomes. Our extensive global network, built over nearly five decades, is a unique competitive advantage that allows us to evaluate businesses and management from multiple perspectives. We tailor our engagement in each country based on our on-the-ground experience and understanding of what is most effective in each region.

For more details, please refer to our ESG Engagement approach.

Rarely resorting to public activism Often using direct engagement Always thinking and acting like owners

If management is not acting on behalf of shareholders, we may publicly push for change, though our preferred method is behind the scenes and out of the headlines.

We work constructively with management to make specific strategic suggestions that are unique to each case and often recommend independent board members.

We apply a business owner, partnership mentality to engagement. We love to cheer management teams on from the sidelines, and we can often add insight on capital allocation or make helpful introductions through our network.

People Business Price

We look to partner with properly incentivized management teams and boards of directors that think and act like owners and are growing value per share through intelligent capital allocation.

We own high quality companies with sustainable competitive advantages, strong balance sheets and expected long-term free cash flow growth.

We buy businesses trading at 60% or less than our conservative estimate of a company’s intrinsic value, calculated using present value of free cash flow, net asset value and/or comparable business sales.

Value: following Ben Graham’s investment discipline

We are value investors and demand a wide margin of safety to minimize the risk of permanent capital loss and maximize return potential.

We believe that margin of safety is the driving force for long-term, intelligent investing, but cheap is not enough. Every business must meet our quantitative and qualitative criteria. We require a high-quality business and management because they increase the probability that the company’s future value per share will grow and that our outcome will be better than expected. We must purchase that quality at a discount to our appraisal value to have a margin of safety in the event of unexpected challenges in the unknowable future. Finding all three investment criteria – strong business, good people and discounted price – is extremely difficult.