Southeastern Asset Management is a Memphis-based deep-value firm founded in 1975 by O. Mason Hawkins to exploit the bargains left by the 1973-74 bear market. Its flagship Longleaf Partners Funds (launched 1987) invest employees' own money alongside clients'. Following Graham's discipline and its "Business, People, Price" framework, it runs concentrated books of 15-25 undervalued stocks held for the long term — famously closing funds to new investors when opportunities were scarce. CEO and Head of Research Ross Glotzbach now leads the firm, which publishes quarterly Longleaf fund commentaries and Research Perspectives notes.
This commentary covers Southeastern Asset Management's Global Fund for Q3 2026. The manager sees the current market as similar to 2000 or 1987, making it a good time for finding undervalued stocks, so they are optimistic. The fund returned -6.21% for the quarter, lagging global markets, but the manager believes portfolio companies' intrinsic value is growing even if stock prices haven't caught up. Key holdings mentioned: Mattel (toy company, received a buyout offer above $20 per share), IDP Education (education firm, received a takeover bid from Blackstone), and Abbott Labs (healthcare company, newly bought by the fund at a price nearly 40% below last year's high).
One-sentence summary: The author believes the current market environment resembles 2000 or 1987, presenting a prime opportunity for deeply differentiated investing, with a stance of [bullish].
The fund returned -6.21% for the quarter and -5.07% year-to-date, significantly lagging the MSCI World (+1.88%/+11.75%) and MSCI World Value (+3.84%/+14.74%). The author acknowledges the disappointing performance but believes the current environment resembles 2000 or 1987, presenting a prime opportunity for deep differentiation investing, rather than 2022, which required a strategy adjustment. The author states, "we believe that we are on the right track even if not all of our investments this year have had sufficient value per share growth." The fund's P/V ratio is in the low 50% range, cash accounts for 4.0%, and it holds 21 stocks.
The author divides the holdings into two groups, accounting for nearly 70% of the portfolio, and believes intrinsic value growth far exceeds stock price performance. The first group consists of stocks with short-term earnings disappointments but intact long-term value (e.g., Mattel, IDP Education, Rayonier, Fortune Brands, Albertsons). Their 2026 sell-side earnings estimates have been revised down by an average of ~20%, but long-term earnings expectations remain largely flat. The second group includes stocks with solid performance but "stuck" or declining prices (e.g., People / MGM, Canal+, Abbott Labs, Universal Music Group, EXOR, CNX, Magnum Ice Cream). Their 2026 earnings estimates have actually risen slightly, yet stock prices fell 5-10%. The author estimates the first group dragged the portfolio down by roughly 100 basis points, while the second group should have contributed 500-1000 basis points. Combined with the earnings exit from Delivery Hero, the portfolio's intrinsic return should have been a mid-to-high single-digit positive.
The author notes that value realization at investee companies can arrive suddenly, citing two recent public examples. After the quarter-end, multiple potential acquirers were reported to be interested in Mattel, and IDP Education received a takeover offer from Blackstone. The author emphasizes that the seeming lack of progress in prior months was due to behind-the-scenes efforts. The author states, "The seeming lack of activity in the few months since we published our letter to Mattel was not due to a lack of effort from us behind the scenes." The author believes these cases demonstrate that ongoing engagement with investee companies can yield returns soon.
Performance Comparison: The author points out that the portfolio's earnings multiples were already attractive at the start of the year but declined a further 10-20% during the year, while earnings risk itself also decreased further. The author considers this situation "abnormal" but sees it as the core investment opportunity.
Regeneron (Hold/Watch): Biopharmaceutical company Regeneron delivered solid results, with its core drug Dupixent continuing to exceed the author's and market's growth expectations. The author notes the company increased share buybacks during the second quarter when the stock was deeply discounted. The stock reacted positively to expectations of a reset agreement with Sanofi regarding Dupixent, which was finalized after the quarter-end, enhancing per-share value.
Abbott Labs (New Position): This diversified healthcare company is a new position (previously held in the 2010s) and started strongly. Before the author's investment, Abbott's earnings slightly missed expectations due to digestion of the Exact Sciences acquisition and turbulence in the medtech and infant nutrition industries. Its stock price fell nearly 40% from last year's highs to the author's Q2 purchase price. Solid Q7 results indicate Abbott is on track to resume high-single-digit to low-double-digit EPS growth while maintaining a safe and growing dividend. The company is also beginning to shed unreasonable infant nutrition liabilities, further protecting downside risk. Additional upside comes from Abbott's historical pattern of spinning off or selling businesses, which it may consider again.
Fortune Brands Innovations (FBIN) (Added/Reduced): Building materials company FBIN's stock fell in Q3, erasing gains from Q2 following the appointment of Jesse Singh as CEO. In August, Singh lowered full-year guidance due to external factors (rising interest rates pressuring all housing-related companies) and internal factors (temporarily using expensive air freight to ensure inventory and reinvesting tariff refunds into product development). The author applauds both long-term correct decisions. The author reduced the position during Q2's stock strength but added back later in Q3.
People Inc. and MGM Resorts (Hold/Watch): Digital and print publisher People Inc. and hospitality/entertainment company MGM Resorts were both drags this quarter. The author's position weight in People is higher than in MGM. Early in the quarter, People reported solid earnings, showing continued progress in simplifying the company; MGM's regional business hit record revenue, and Las Vegas revenue grew for a second consecutive quarter. Late in the quarter, People announced it was withdrawing its offer to acquire a majority stake in MGM, combined with weak near-term Las Vegas trends, causing MGM's stock to plunge well below pre-offer levels. The next day, news emerged that MGM was considering acquiring People. The author believes a merger between the two companies could still be sensible and value-accretive, with the main questions revolving around the value and future of People's assets beyond its MGM stake. The author sees creative ways to structure a new company and maintains communication with both.
Rayonier (Hold/Watch): Timberland owner Rayonier had no major corporate news this quarter, with results in line with expectations, continued share buybacks, and a healthy dividend. Short-term stock performance is influenced by interest rates and lumber prices, both of which were weak at quarter-end. The author views this as a understandable, long-term irreplaceable asset. The market has begun to recognize Rayonier's strong position, narrowing its valuation gap with the only listed US peer, Weyerhaeuser, as the author predicted early this year.
Albertsons (Hold/Watch): Supermarket operator Albertsons' quarterly report was negatively received by the market for multiple reasons. Earnings and guidance missed expectations (same-store sales -0.8% vs. expected -0.5%), and the company announced additional investment spending, leading to a 20% drop in full-year EPS from prior guidance. Poor communication (CFO departure, unclear conference call) exacerbated negative sentiment. The author initially invested believing EPS/free cash flow should be in the $2-2.50 range, and even conservatively at $1.50-2, the stock could trade at 10x P/E (below the long-term supermarket average). Both scenarios remain achievable at the current stock price below $12. The author believes majority shareholder Cerberus and several executives who bought stock after the price drop can improve operations and may consider a range of strategic options.
Gruma (Hold/Watch): Global tortilla and corn flour company Gruma continues to face headwinds from US anti-immigration policies reducing demand from some customer segments. Its US market (representing ~70% of company value) is growing a few percentage points slower than historical rates, but the author believes this won't last forever. Growth outside North America is strong, indicating unchanged demand trends under normal conditions and the company's excellent execution remains intact. The company has increased share buybacks, becoming one of the largest repurchasers as a percentage of float in the author's portfolio during Q2.
Canal+ (Added): French and African pay-TV operator Canal+ was a drag this quarter, oscillating in the author's letters from a drag to a contributor and back to a drag over three consecutive quarters. The author sees this as demonstrating short-term market volatility creating opportunities in fundamentally sound businesses. July's H1 2026 results were solid, with the company confirming it is on track to achieve its full-year €250 million synergy target, and MultiChoice country subscriber acquisitions grew 40% vs. H1 2025. However, by September, the stock had given back these operational gains, primarily due to French political macro headlines. Even if some rumored industry changes are implemented, the author believes their net impact will be limited, less than the gross impact (still manageable at current valuations) reported by the media. The author and company insiders used the stock weakness to add to positions at very attractive valuations.
Mattel (Hold/Watch): Toy, media, and consumer products company Mattel fell this quarter after management indicated at a mid-September meeting that 2026 guidance would be back-end loaded. At quarter-end and as the author publishes this report, Ynon Kriez announced his departure to become co-CEO of Skydance, with Roger Lynch appointed as the new CEO. On October 1, the Wall Street Journal reported that Authentic Brands, a private company with a market cap over $20 billion, was interested in acquiring all of Mattel for over $20 per share, causing the stock to rebound. Further related reports emerged in October.
| Ticker | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Abbott Labs | New Position | Strong start, expected to return to high-single-digit to low-double-digit EPS growth | Buy price nearly 40% below last year's high; solid July quarter results |
| Canal+ | Add | Short-term macro headwinds create opportunity, fundamentals continue to improve | Solid H1 2026 results; MultiChoice user acquisitions up 40% vs H1 2025 |
| Fortune Brands Innovations (FBIN) | Add/Reduce | Applauds CEO's two long-term correct decisions, added in late Q3 after Q2 reduction | Q3 share price decline; CEO cut full-year earnings guidance due to rates and internal issues |
| Mattel | Hold & Watch | Value realization could come suddenly, received acquisition interest | Received acquisition interest from Authentic Brands at $20+ per share; Ynon Kriez departed |
| IDP Education | Hold & Watch | Value realization could come suddenly, received acquisition offer | Received acquisition offer from Blackstone |
| People Inc. | Hold & Watch | Withdrew offer to acquire majority stake in MGM, but merger may still be reasonable | Solid earnings report early in the quarter; MGM shares plunged well below pre-offer levels |
| MGM Resorts | Hold & Watch | Regional business hit record revenue, but Las Vegas trends are weak | Regional business at all-time high; MGM considering acquiring People |
| Rayonier | Hold & Watch | Long-term irreplaceable asset, market has begun to recognize its advantageous position | Continued share buybacks; valuation gap with Weyerhaeuser narrowing |
| Albertsons | Hold & Watch | Major shareholder and management buying may improve operations, strategic options possible | Share price below $12; same-store sales -0.8% vs -0.5% expected; full-year EPS guidance down 20% |
| Gruma | Hold & Watch | US headwinds won't last forever, strong growth outside North America | US market growth a few percentage points slower; Q2 buybacks among the largest as a percentage of float |
| Regeneron | Hold & Watch | Core drug Dupixent continues to beat expectations, share price reacted positively to Dupixent reset agreement | Increased share buybacks in Q2; Dupixent agreement reached after quarter-end |
| Universal Music Group | Hold & Watch | Good results but share price "stuck" or declining | 2026 earnings expectations slightly up, share price down 5-10% |
| EXOR | Hold & Watch | Good results but share price "stuck" or declining | 2026 earnings expectations slightly up, share price down 5-10% |
| CNX | Hold & Watch | Good results but share price "stuck" or declining | 2026 earnings expectations slightly up, share price down 5-10% |
| Magnum Ice Cream | Hold & Watch | Good results but share price "stuck" or declining | 2026 earnings expectations slightly up, share price down 5-10% |