* Chesapeake shareholder Hawkins occasional activist
* Hawkins' value strategy has led to uneven performance
* Hawkins' fund has stake in Chesapeake since 2006
By Sam Forgione
NEW YORK, May 11 (Reuters) - O. Mason Hawkins, whose $34 billion mutual fund firm is Chesapeake Energy Corp's largest shareholder, is best known as a Warren Buffett-style value investor who takes big stakes in companies and holds them, often for years.
But occasionally Hawkins turns activist and agitates for corporate change. His firm, Southeastern Asset Management, owns 13.6 percent of the embattled natural gas company, whose shares are down 41 percent since Southeastern began building its stake six years ago.
Chesapeake's board has come under fire after Reuters publicized that the company's co-founder and Chief Executive Officer Aubrey McClendon had borrowed $1.5 billion against stakes he received in wells drills by Chesapeake.
Hawkins, chairman and chief executive officer of Southeastern, sent a letter to Chesapeake's board on May 7 urging them to be open to an approach by a potential acquirer. A few days earlier, Hawkins applauded the board's decision to strip McClendon of his title as chairman.
Just a few months ago, Hawkins was praising McClendon for his ability to monetize the company's oil, gas and land assets.
Yet with shares of Chesapeake plunging about 10 percent since the initial Reuters story on April 18 about McClendon's loans, Hawkins is emerging as the voice of the Oklahoma-based company's beleaguered stockholders.
He took a similar activist strategy with Olympus, the Japan-based optics manufacturer, after it got embroiled in an accounting fraud scandal last October.
But even before the disclosure about the loans to McClendon, shares of Chesapeake had fallen 54 percent since September 2008 as a result of a collapse in natural gas prices.
Hawkins' strategy of focusing on company fundamentals and seeking out stocks he believes are undervalued is one pioneered by Buffett at Berkshire Hathaway. But the returns of Hawkins' flagship Longleaf Partners Fund, which holds Southeastern's Chesapeake stake, have been anything but Buffett-like in the past five years.
Hawkins declined to comment on Chesapeake or his funds' performance, but emailed: "We appreciate your interest."
Hawkins, 64, was raised in Georgia and currently runs Southeastern out of Memphis, Tennessee. He is an acolyte of renowned value investor Benjamin Graham - also Buffett's idol - and donated $1 million to the Graham-Buffett Teaching Endowment fund in 1997.
Hawkins, an avid pheasant hunter, is known for his in-depth research into company management and told business students in a 2005 speech that he reviews "everything from their college days to their current CEO status."
There is little biographical information on the company's website and he is reluctant to speak to the press, rarely giving interviews.
Longleaf Partners Fund, which has $8.63 billion in assets and invests in companies as diverse as Walt Disney Co, construction company Vulcan Materials and Abbott Laboratories, has a five-year annualized return that is down about 2.42 percent. By comparison, mutual fund research firm Lipper reports other funds with similar investment styles are down just 0.4 percent over the same period.
Over the past five years, Berkshire Hathaway class A Shares are up 12.6 percent.
This year Longleaf is up 8.37 percent, modestly trailing the 8.49 percent gain in the S&P 500.
Longleaf suffered a big loss in 2008, during the height of the financial crisis, when it plunged 50.6 percent. Meanwhile, the S&P 500 and the fund's main competitors were down about 37 percent, according to Lipper data.
But Longleaf bounced back in 2009 with a 53.6 percent return that dominated its peer group.
Fund experts and Hawkins admirers say lagging performance from time to time is to be expected with a fund that goes after beaten down stocks and generally invests in no more than 25 companies at a given time.
"If you're a value investor like they are, you're going to have times where you're very much out of step with the market. And they have been out of step with the market for the last couple of years," said Don Phillips, president of fund research at Morningstar.
John Rogers, the head of Ariel Investments, said "the short-term performance is totally irrelevant to me," and likened Hawkins' letters to shareholders to those of Buffett and PIMCO co-founder Bill Gross. Rogers, whose mutual fund firm follows a similar strategy to Southeastern's, said Hawkins' funds are offered in the 401K plan for Ariel's employees.
Hawkins' faith in Chesapeake had not waned much until recently.
Longleaf bought over 20 million shares of Chesapeake in the second quarter of 2006 and has steadily increased its exposure ever since, except for a 13-million share reduction in the first quarter of 2008, according to regulatory filings. As of May 2, 2012, the fund owned almost 90 million shares.
Over that period, Chesapeake's stock has plunged 41 percent.
Hawkins, in his 2011 letter to investors, generally praised McClendon's stewardship of the company.
"Aubrey McClendon, co-founder and CEO, has been controversial but has consistently monetized assets at far above cost," Hawkins wrote.
PUSH FOR CHANGE
With Olympus, Hawkins only went activist in late October after the accounting scandal broke, eventually calling in November for key members of the company's board to resign or be replaced.
In March, Southeastern reduced its stake in Olympus to 3.95 percent from 5.09 percent, after its proposal for a new lineup fell short of getting sufficient shareholder support.
Hawkins has also signaled that Southeastern may push for change at Vulcan Materials Co and Martin Marietta Materials Inc by filing 13D stakes in each this year, which give shareholders special voting and investment power under Securities and Exchange Commission rules.
Those who know Hawkins say that his activism stems from his conviction in his holdings rather than a desire to seek out conflict.
"On the scale of those that just go out and raise money to be activist, he's not on that scale at all," said Mario Gabelli, chairman and chief executive officer of GAMCO Investors Inc.
Gabelli added that Hawkins doesn't advertise his activism, but adopts it when he senses "something wrong in the company in terms of corporate governance."