As of Nov. 27,
of Tennessee-based Southeastern Asset Management, which is the
adviser to Longleaf Partners Funds, has reported a 10 percent
decrease in his stake of franchising company DineEquity Inc. (
), according to
GuruFocus Real Time Picks
Reducing more than 310,000 of his shares at an average price of
$62, this is Hawkins' fourth stake reduction of DineEquity since
acquiring the stock in the third quarter of 2008. Starting off
with about 3.2 million shares in the beginning of his holding
history, Hawkins now has a shareholding of 2,798,762.
DineEquity's stock price is close to its 10-year high, trading at
$63.06 this morning.
With a market cap of $1.14 billion, DineEquity is the parent
company of restaurant chains, IHOP and Applebee's Neighborhood
Grill and Bar. Based in California, DineEquity operates more than
3,500 restaurants in 18 countries, making it one of the largest
full-service restaurant companies in the world.
DineEquity has had consistent growth over the years, its value
shooting in a positive direction especially over the last five
years, with a revenue growth rate of 26.7 percent.
Hawkins, along with Southeastern Asset Management chief
investment officer, G. Staley Cates, recognized this value growth
in its third
quarter shareholder letter
released in October, stating:
"Many management teams have taken steps to remove their stocks'
discounts through spinning out divisions, selling all or portions
of their companies, and initiating, reinstating, or meaningfully
increasing dividends... In Small-Cap, DineEquity has sold the
last of its owned Applebees restaurants to become 99%
In its third quarter fiscal results, DineEquity reported to
decreasing its debt by $167.2 million, due to generating strong
free cash flow in the three months ending Sept. 30. Combining the
company's booming free cash flow with its reduction in expenses
and net proceeds, DineEquity was able to reduce its total debt by
$255.5 million in the first nine months of 2012.
Out of the 41 stocks in Hawkins' portfolio, the consumer services
sector is the second largest sector represented, right after the
financials sector. As of the end of the third quarter, the
portfolio is valued at $22.4 billion, with a quarter-over-quarter
turnover rate of 2 percent.
Before choosing investments, Hawkins places heavy emphasis on a
company's management and its ability to operate the business. His
firm's research especially focuses on four key areas:
- If the CEO's interests are aligned with shareholders.
- The CEO's operating and capital allocation record, at the
current company and in previous roles.
- Using the firms' vast network of clients, corporate
managers, industry experts, and friends to find out everything
we can about the CEO, including personal as well as
- Hearing about the CEO and CFO's management approaches,
especially focused on building value per share, during an
actual meeting with Insiders.
On its Insider trend history (shown in the chart below), it is
apparent that DineEquity Insiders have been doing more selling
than purchasing of shares, corresponding to the company's
Pertaining to Southern's investments, Hawkins and Cates said they
predict their stocks will do well over the next five years,
"Most of our companies are market leaders with competitive
advantages that should enable some degree of pricing power as
well as unit growth...Many have increased their shareholder
alignment by buying shares personally over the last year. To the
extent needed, we will push as hard as is feasible to insure that
managements and boards remain focused on their obligation to act
in the best interest of owners. We will move on to better
opportunities if we believe our engagement will not produce
With its P/E ratio close to its three-year low, DineEquity is
ranked 6 out of 10 in
Profitability and Growth
on GuruFocus, despite a Financial Strength of 4 out of 10 and a
1-star rank in Business Predictability.
To read more about Mason Hawkins and Longleaf Funds, visit our
GuruFocus article archives. Also see his top holdings, his
undervalued stocks and his high yield stocks.
About GuruFocus Real Time Picks
GuruFocus Real Time Picks alerts you of the stock purchases and
sales that Gurus have made within the last two days. Follow your
favorite Gurus closely with GuruFocus' Premium Membership! If you
are not a Premium Member, we invite you for a 7-Day Free
Trial.About GuruFocus: GuruFocus.com tracks the stocks picks and
portfolio holdings of the world's best investors. This value
investing site offers stock screeners and valuation tools. And
publishes daily articles tracking the latest moves of the world's
best investors. GuruFocus also provides promising stock ideas in
3 monthly newsletters sent to