Longleaf Partners Fund Q1 2025 Update: Resilience Amid Market Headwinds
In its first-quarter investor letter for 2025, the Longleaf Partners Fund, managed by Southeastern Asset Management, provided insights into both its challenges and strategic outlook. The fund experienced a return of -5.14% in Q1, lagging behind the S&P 500’s -4.27% return but showing resilience compared to the Russell 1000 Value index, which gained 2.14%. Despite this rocky performance, the firm’s overall confidence in future returns appears to have strengthened as the quarter unfolded.
Investing in Quality Companies for Resilience
Longleaf Partners emphasizes its commitment to investing in high-quality companies that can weather market volatility. This strategy has enabled its portfolio to significantly outperform the index since the market peak on February 19th. Notably, the underlying value of shares outpaced the fluctuating stock performance during this period, reflecting the firm’s focus on long-term value creation rather than short-term gains.
For investors keen on exploring the fund’s high-conviction holdings, a detailed analysis of the top five picks is available.
Spotlight on CNX Resources Corporation (NYSE:CNX)
One of the key positions highlighted in the investor letter was CNX Resources Corporation. This independent natural gas and midstream company faced a challenging quarter, ending the month with a -3.78% return, although its share price appreciated by an impressive 30.04% over the last year. On April 17, 2025, CNX Resources stock closed at $30.82, boasting a market capitalization of $4.537 billion.
Longleaf Partners noted that CNX was a detractor for the quarter despite being a stronger performer in 2024. The company encountered setbacks related to government incentives for its coal mine methane gas capture program, which fell short of an estimated upside that could have added $10-20 per share to its value. However, this temporary setback provided an opportunity for Longleaf and CNX to purchase more shares at a value they believe does not fully reflect the company’s potential.
In the words of the Longleaf Partners management:
"CNX remains focused on what is within its control, leveraging its low-cost structure and disciplined hedging strategy to generate free cash flow in a variety of price environments."
This strategic positioning could serve as a buffer against future volatility, making CNX an intriguing investment opportunity as the market evolves.
A Broader Investment Perspective
While Longleaf Partners expresses confidence in CNX Resources, it’s noteworthy that this stock did not make it onto the list of the 30 Most Popular Stocks Among Hedge Funds. Data reveals that 41 hedge fund portfolios held positions in CNX at the end of Q4, an increase from 31 in the previous quarter. However, at Extreme Investor Network, we maintain a forward-looking approach and see robust potential in sectors like artificial intelligence (AI), which may offer higher returns within shorter time frames.
For instance, if you’re on the lookout for promising AI stocks trading at attractive valuations—like those under five times earnings—be sure to check out our report on the cheapest AI stocks.
Conclusion
As Q1 2025 unfolds, the Longleaf Partners Fund exemplifies the delicate dance between navigating immediate market challenges and positioning for long-term growth. While investments like CNX Resources may have hurdles to clear, maintaining a focus on quality and resilience will remain paramount for savvy investors. Stay tuned to Extreme Investor Network for ongoing insights and strategies that could set you apart in the dynamic landscape of investment opportunities!