18 Million Reasons to Feel Better

When General Motors stock (GM/NYSE) dropped into the teens a while back, I didn't buy any.

I didn't sell any of my position. Yet I didn't add to it either.

Why? Because while I still felt that GM would turn to be a fine investment, the fact is it's a large position in the portfolio. I wanted to maintain the GM holding, yet I also felt using cash reserves for other investments was more prudent.

I noticed that Mason Hawkins and Staley Cates of Southeastern Asset Management did the same with their Longleaf Partners Fund. That is, they stood pat with their GM position and used avaiable cash for new investments. They bought more Dell in the 4th quarter, to name one. I spent the 4th quarter establishing positions in Deckers Outdoor (DECK/NASDAQ) and Comcast Corp. (CMCSK/NASDAQ) while adding to stakes in USA Mobility (USMO/NASDAQ) and The DirecTV Group (DTV/NYSE). (It should be pointed out that Longleaf Partners owns a big chunk of Comcast.)

Then I came across this Bloomberg report in the Australian Financial Review. The focus of the piece is news that Morgan Stanley has boosted its stake in GM and now owns 5.1% of the auto company's stock.

Well, that's all well and good. And it comes on the heels of Kirk Kerkorian's Trancinda Corp. recently reestablishing its 9.9% GM stake. But I've written repeatedly (and perhaps to the point of annoyance) that Hawkins and Cates holding GM means a lot more than Kerkorian's holding the stock.

So scroll down to the bottom on the report linked. You'll see that (while Longleaf Partners Fund has maintained its GM position) Southeastern Asset Management purchased a lot more GM stock in the 4th quarter:

Southeastern increased its holdings by 18 million shares in the fourth quarter, the most of any investor, according to filings this week. The company is run by Mason Hawkins, a buy-and-hold investor who owned shares of Hilton Hotels Corp for six years before selling near a record high at the end of 2004.

Of course, Southeastern's increased stake doesn't guarantee that GM will be a profitable investment -- I'm underwater with the stock -- let alone a repeat of Hawkins' performance with Hilton.

But those 18 million shares purchased by Hawkins and Cates leave me feeling better. And I'm hoping they and their owners won't be a case of good company onboard another Titanic.

Comments

[seb]

Interesting post. Very controversial stock. Martin Whitman was asked about GM last night and he said that the debt looked cheap but bondholders might get squeezed in the reorganization plan because some shareholders will maneuver to get a little something.
He didn't mention the stock.

[John]

seb,

I may end up with egg on my face, but I remain cautiously optimistic about GM. I haven't read any Whitman comments about the stock, but know he frequently has bonds in his fund.

Thanks for reading.

[Max]

If you haven't already, check out the article in the most recent Fortune. It has a lot of good insights on the GM situation and from Rick Wagoner.

[Max]

Here is the article (written by Carol Loomis), if you don't want to get the magazine:

http://www.controlledgreed.com/2006/02/18_million_reas.html#comment-14122512

[Max]

Oops, pasted the wrong url.
http://money.cnn.com/magazines/fortune/fortune_archive/2006/02/20/8369111/index.htm

[John]

Max,

Thanks -- I'll check it out.