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They added 6M shares of GM, bringing their total position to 14.7M, or 4.7% of assets:

GM declined 26% in the first quarter when the company announced that
earnings would be below expectations in 2005 based on lower sales and higher healthcare costs in North America. The announcement did not aÅect our appraisal of GM because we believe the value of the company rests not in North America, but in GMAC and its overseas operations, which are both performingon target. Management is aggressively addressing the North American challenges.

Because the stock sells for less than half of our appraisal, we added to our position during the quarter.>

One of the tricks of the money management business is that you always have cash coming in from retirement funds, thus you have a unique situation where you can lower your initial cost per share when a stock goes bad on you. The danger with this strategy is that if the stock goes down another 10-15% then you will have a lot of angry shareholders and they may take their money out. I have always felt is was better to stick to the losing position and try to find other stocks to make up for the loss. I disagree with Longleafs strategy.

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