Southeastern Asset Management's Longleaf Partners Fund initiated a position in Abbott Laboratories (NYSE: ABT) in the second quarter after the stock fell nearly 40 percent from its 2025 high, according to the fund's third-quarter 2026 investor letter.
The thesis is straightforward: Abbott's July earnings suggest the company can return to high-single to low-double-digit EPS growth after stumbling through the first half of 2026. The healthcare giant was hit by an earnings miss, integration costs from its Exact Sciences acquisition, and headwinds in medtech and infant nutrition. Abbott closed at $102.45 on Oct. 20, 2026.
Longleaf Partners identified two sources of upside. First, Abbott has begun addressing infant nutrition liabilities, which should shore up the stock's downside. Second, the fund notes Abbott has a history of spinning off or divesting businesses—a tool management could deploy again if the company needs to unlock value.
The dividend provides a floor. Abbott's payout is secure and growing, offering investors income while they wait for the operational turnaround.
The fund's broader concern is valuation compression across its portfolio. Longleaf Partners' holdings have seen multiples contract despite stable fundamentals, which the firm views as an opportunity. Macro headwinds—chiefly higher interest rates—are pressuring the market, but Longleaf Partners argues its financially strong positions should weather the storm.
Longleaf Partners returned 2.41 percent in Q3 2026 but is down 3.15 percent year-to-date, trailing the S&P 500's 12.75 percent gain. The fund's three-year annualized returns stand at 11.7 percent. While performance has lagged recently, the fund's strategists maintain that the gap between intrinsic value and stock prices justifies staying the course.
