3Q26 Partners Fund Commentary

Stance: Southeastern says the market "is still not rational" and that values have grown faster than prices in 2026 — "we are confident that this will be another great time to be different." No dramatic portfolio changes planned despite a weak YTD (-3.15%). Valuation case: Portfolio earnings multiples have fallen 10-20% this year while the earnings themselves were "further derisked" — "This is not normal, but it is our opportunity from here." They argue short-term earnings misses (Mattel, Rayonier, Fortune Brands, Albertsons) are being extrapolated in perpetuity, while long-term earnings power is roughly flat. Catalysts/engagement: Multiple acquirers reportedly interested in Mattel post-quarter (new CEO Roger Lynch); they remain engaged on a People Inc./MGM combination they believe can be value-per-share accretive; EXOR buying back stock and selling assets; Magnum Ice Cream's spin restriction lapses December 2027, opening sale optionality. New positions: Universal Music Group (new in Q3) and Abbott Labs (bought Q2 after a near-40% decline). No exits. Trimmed Avantor into strength as it approached their value; added to Fortune Brands later in Q3. Risks named: Higher interest rates pressuring housing- and rate-sensitive holdings (Fortune Brands, Rayonier); Albertsons in "show-me mode" after an EPS reset and CFO departure. Bottom line: Deeply contrarian and concentrated, leaning into derated but financially strong holdings, expecting corporate activity and self-help — not market sentiment — to close the price-to-value gap.