CK Hutchison (HKSE:00001, Financial) (-31%, -2.35%), a conglomerate of telecommunications, health and beauty, infrastructure, global ports and energy, was another top detractor in the quarter. Its underlying stake in Husky Energy is facing strong headwinds in the current oil environment, but Husky only comprises a low single-digit percentage of CK Hutchison’s overall appraisal. Health and beauty chain Watsons stores in China have already seen the impact of COVID-19 peaking in February, and it began a solid recovery in March as the country is gradually reviving. Its European retail chain Superdrug is seeing strong double-digit sales growth and is likely to remain open, even in a potential continent-wide lockdown, as it provides critical services. Telecom subsidiary 3 Group Europe reported a 17% year-over-year (YOY) increased in EBITDA, driven by successful growth at Italy Wind Tre. CK Hutchison net debt/EBITDA is below 2x, and all three credit rating agencies have maintained a stable A rating. The stock trades above a 6% dividend yield today. The Li Ka-shing family and other directors of the company bought 1.25mn shares in the quarter, signaling their strong confidence in the current uncertain environment.
From Mason Hawkins (Trades, Portfolio)' Longleaf Partners first-quarter 2020 commentary.
