CNX Resources: Nick DeIuliis on a 10+ Year Journey of Value per Share Creation with Southeastern

They start by discussing Tim’s journey from his early interest in investing to co-founding and leading LivingSocial to joining Graham Holdings (GHC) in 2014. The unique factors of being a family-controlled company and former board member Warren Buffett’s influence are highlighted. They discuss GHC’s three main businesses in education, healthcare and media, along with how the company stays focused as a holding company. Tim also shares his perspective on GHC’s overfunded pension asset and the company’s long-term capital allocation strategy. As always, we like to end episodes with a personal question, so Tim reflects on the lessons learned from his summer job at a US Post Office sorting facility during college.

Southeastern’s CEO and Head of Research Ross Glotzbach sits down with Nick DeIuliis, CEO of CNX Resources. They delve into a range of topics, beginning with Nick’s history in the Pittsburgh area and at CNX, where he has been an employee since the 1990s and became CEO in 2014. Ross and Nick reminisce about Southeastern’s engagement with CNX that led to a new board and approach to value per share creation. Nick discusses the company’s strategic transformation, which has driven substantial free cash flow per share generation. Topics include share repurchase, balancing the short-term and the long-term, hedging, and M&A. Nick and Ross also discuss CNX’s Tangible, Impactful, and Local sustainability efforts along with their Radical Transparency initiative. To close, Nick shares a glimpse into his personal life.

Manning and Ross cover a lot of ground, starting with Southeastern’s history of investing in White Mountains multiple times, dating back to its predecessor Fireman’s Fund under the leadership of Jack Byrne in the ‘80s. Manning talks about how he joined White Mountains and discusses how the spirit of Jack Byrne still lives on at White Mountains today. Next, Manning answers what makes insurance a good (or not so good) business and how White Mountains is uniquely advantaged within that space. He then talks about how the company attracts and adds value through great partnerships, like NSM, including a discussion of White Mountain’s sell discipline. Manning talks in detail about its partnerships with Kudu, BAM and PassportCard, as well as MAX, Bamboo and WM Partners. He discusses how White Mountains determines what future deals will be a good fit and also talks about how he thinks about share repurchase. Finally, Manning shares a bit about his personal hobbies.

Jay and Staley have a wide-ranging discussion, starting with the story of Jay’s formative Southern roots and how he got to know Southeastern before joining AMG. Jay talks about how the value proposition of AMG’s model magnifies the inherent competitive advantages of each independent Affiliate by offering access to a broad range of strategic capabilities, including succession planning, distribution capabilities, and strategic product development, among others. He highlights the importance of being an active partner while supporting AMG’s Affiliates’ independence. Next, Jay discusses how AMG has evolved over time from a business profile primarily characterized by traditional, long-only active public equity exposures, to one that is more heavily weighted towards alternatives – private markets and liquid alternatives. Jay addresses the diversification benefits of performance fees related to the alternatives business, despite the perception of added volatility. Jay then discusses recent divestitures at strong prices that underscore the significant valuation discount for the overall business. Staley and Jay next talk about the impact of flows on near-term share price, why all flows are not created equal, and why cash is a better metric by which to measure the business. This leads to Jay discussing capital allocation: AMG’s primary goal is to invest in growth opportunities, but has also returned excess capital through share repurchases. Jay also talks about AMG’s views on sustainable investing as a secular growth trend. They round out the discussion with Jay talking about Southeastern’s approach to engaging with our management teams and highlighting the inspiration that he took from The Outsiders, a book we share with all our CEO partners and highly recommend to listeners. Finally, Jay ends by discussing the importance of AMG’s culture and commitment to the community.

Staley and Brad have a wide-ranging discussion, covering the many areas in which Brad and Southeastern have partnered together across investing, civic and charitable endeavors.   First, Brad begins by sharing his retail history beginning with Proffitt’s and his acquisition of Saks Fifth Avenue, where we overlapped as shareholders. He discusses managing a volatile business through September 11th, the lessons it taught him in patience with “non-linear returns,” as well as how he maintained his focus on creating value for shareholders when approached by Private Equity. Brad next discusses his experience on the board of Lululemon, from its early days as a small, privately-owned sports apparel business to the incredibly successful public company it is today. Brad and Staley then discuss Dillard’s, another company where we overlapped with Brad on the board during our ownership period from 2007-2012. Brad goes on to share his views on the state of retail today in the face of Amazon and the fast pace of digital change.   Next, the discussion focuses on Brad’s additional board appointments. Brad shares his timely views on the current bank crisis, drawing upon his experience as a member of the board at First Horizon, which he joined just before the onset of the great financial crisis. Brad and Staley then discuss Brad’s experience going on the board of Chesapeake Energy at Southeastern’s suggestion and his experience in working with us as shareholders while he held the board seat, including how his time at Chesapeake helped deepen his understanding as a FedEx board member. He then transitions to discuss his current role on the board at FedEx and why he believes “phase 2” of FedEx will be even more exciting than the first 50 years of the business. He talks about the positive implications of One FedEx for customers, employees and shareholders at FedEx. Brad also discusses another current investment overlap at Westrock Coffee, where Brad is Chairman of the Executive Committee, alongside CEO and Co-Founder Scott Ford, who we also partnered with in his prior role as CEO of Alltel.   Finally, Brad and Staley discuss civic and charitable overlap in Southeastern’s hometown of Memphis, TN. Brad discusses his one-year tenure as Interim President of the University of Memphis and the role he played in bringing in a transformational President, David Rudd, and the positive impact it has had on the broader Memphis community. The conversation concludes with Brad discussing Hope 2 Hire, a charity he founded that provides hands-on job training and life skills development for the prison population of Memphis.

Following introductions, David shares with Ross lessons he’s learned over the course of his career from famed business leaders Jack Welch and John Malone.  Next, David recalls what Discovery was like when he arrived in 2006 and the parallels to Warner Bros. Discovery today. At Ross’ request, David shares insights into his views and predictions about the media landscape from 2010 and assesses how those views have come to pass. David then opines on how the Warner Bros. deal came together and the turbulence along the way while getting various streaming services on a unified platform. Ross and David discuss what makes certain studios such as Disney, Warner Bros. or HBO unique, and how a studio can produce quality, award-winning entertainment while still making a profit. David provides his views on what Ross calls “the non-fiction” set of brands that Warner Bros. owns, such as HGTV, Food Network and CNN, which have become stronger assets in recent years. Next, Ross asks David to talk about John Malone’s approach to performance-based compensation for executives.  Ross and David go on to compare notes on members of the Warner Bros. Discovery’s Board of Directors and their experience. They then discuss Discovery’s history of promoting sustainability and corporate social responsibility in its programming. Finally, Ross asks David to share an anecdote about the last time he spent a special moment with his family.

Ross and Mark begin by discussing the global optimization of Hyatt as a brand under Mark's leadership. Next, Mark reviews his progress in increasing Hyatt’s global brand presence, while also transitioning to a more asset light strategy and discusses why Hyatt has been able to perform head-to-head with the industry’s largest brands to build a superior long-term growth pipeline. They then shift to discuss the impact of COVID on the hospitality industry - when Mark felt that consumers would begin to travel again, his views on when business and group travel will come back and the innovation and efficiencies that the last few years have inspired at Hyatt and in the industry more broadly. Next, they discuss the expansion of Hyatt’s resorts portfolio with the ALG deal and how Mark prioritizes buying vs. building into new locations and how different of a skill selling at the right price is to expanding. Mark then covers the evolving impact of home-sharing on the hospitality industry and why it is not an existential threat for hotel companies. Next, Mark talks about Hyatt’s purpose of “caring for people so they can do their best” and how he has prioritized wellbeing. He discusses Hyatt’s commitment to diversity, equity and inclusion and details the DEI initiatives the company has undertaken, as well as Hyatt’s – and Mark’s personal – focus on giving back. Mark then talks about his history of working with the Pritzker family and the family’s involvement at Hyatt today and discusses his thoughts on capital allocation and specifically share repurchase. Finally, he ends with a few personal recommendations on Hyatt properties to visit this year.

Staley and Ryan start by discussing Ryan’s background and why he chose to join Realogy. Next, they discuss the interplay of technology and human agents in the real estate world and how that has shifted with COVID. Ryan then describes the pros and cons of iBuying and the opportunities that Realogy has in the luxury space. They shift to cover macro topics, including Ryan's view of the housing market, the future of the office post-pandemic, millennial home ownership, long-term interest rates and regional differences in housing markets. Ryan next details the difference between Realogy’s owned and franchise segments and potential refranchising opportunities that he has considered. Ryan describes the balance sheet improvements he has made since he joined the firm, including issuing convertible notes in 2021 and how he weighs capital allocation decisions versus buying back discounted shares. Finally, Ryan discusses Realogy's commitment to creating a diverse organization that operates in a socially and ethically responsible way and ends with a discussion of his outlook for the business.

Ross and Tony start by discussing Tony’s background, having grown up in the real estate industry, how he forged his own path and how that lead him to ESRT. Tony describes ESRT’s unusual IPO process and discusses how having a separate family office helps him as a real estate operator. Next, they discuss the iconic nature of the Empire State Building Observatory and how it has quickly adapted in the COVID environment. They then discuss how ESRT has been a leader in prioritizing ESG initiatives even before the company’s IPO. Tony discusses plans to reach net-zero by 2035 and talks about Governance at ESRT, covering the supervoting share structure, as well as capital allocation considerations like when is the best time to buy back shares. Next, they shift to discuss how Tony and team navigated the business through the COVID environment and how it impacted everything from the safety of its buildings and tenants, capital allocation decisions and M&A opportunities. Tony describes how the Observatory was the first New York attraction to reopen in July 2020 and discusses how he know that both NYC and ESRT would bounce back from the pandemic. Finally, Tony ends by sharing what he learned by leading a public company over the last 18 months and what he likes to do with his family in New York City.

In this episode, Southeastern's Vice-Chairman Staley Cates interviews highly respected peer and long-term friend of the firm, Jonathon Jacobson, Founder of HighSage Ventures and former CIO and Co-Founder of Highfields Capital. Staley and Jonathon have a wide-ranging discussion, covering the past, present and future of the industry. They begin with Jonathon’s decision to close Highfields and return investors’ capital in 2018, amidst a backdrop of value being dramatically out of favour [4:39 – 10:44]. Jonathon then touches on the work that his family foundation, the One8 Foundation, is doing and the long-lasting impact of COVID on education [10:45 – 16:19]. Next, Jonathon shares his reflections and insights on investing after having stepped away from the computer every day [16:20 – 23:30]. He discusses value vs. growth and how those traditional measures have morphed over time, touching on some of the biggest mistakes he believes value investors have collectively made [23:31 – 28:10]. Staley and Jonathon then discuss active vs. passive and how the institutional investor committee mindset has shifted [28:11 – 32:17]. Jonathon delves deeper into how his investment philosophy has developed over the last two decades [32:18 – 35:47]. Next, he addresses the recent SPAC mania and GameStop frenzy, contrasting this with the long-term value of shorting and highlighting his experience shorting Enron [35:48 – 45:33]. Next, Jonathon discusses lessons learned from setting up an asset management business, including key takeaways on getting the right structure, hiring the right talent and the need to evolve over time as a firm grows [45:34 – 49:26]. Staley and Jonathon discuss interest rates and inflation as a risk to the industry [49:27 – 53:28] and then discuss great businesses and management teams on Jonathon’s wish list, covering a few shared war stories along the way [53:29 – 58:24] Jonathon talks about the importance of a long-term focused client base [58:25 – 1:05:10], shares some of his favorite reads [1:05:11 – 1:06:26] and ends by talking about his future plans [1:06:30 – 1:08:09]. The information presented is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Securities identified do not represent all the securities purchased, sold, or recommended to advisory clients. The views and opinions expressed by the Southeastern Asset Management speakers are their own as of the date of the recording. Any such views are subject to change at any time based upon market or other conditions. Southeastern Asset Management disclaims any responsibility to update such views. These views should not be relied upon as investment advice. And because investment decisions are based on numerous factors may not be relied upon as an indication of trading intent on behalf of any Southeastern Asset Management product. Neither Southeastern Asset Management, nor the speakers can be held responsible for any direct or indirect loss incurred by applying any of the information presented. Mr. Jacobson’s experience is unique and any other Longleaf shareholders experiences may vary. Past performance does not guarantee future results, so your returns may be more or less than those experienced. No fee was paid to Mr. Jacobson for his participation in this podcast.