Martin Whitman

Martin Whitman

Last Update: 09-27-2016
Related: Third Avenue Management

Number of Stocks: 36
Number of New Stocks: 3

Total Value: $1,127 Mil
Q/Q Turnover: 6%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Martin Whitman Watch

  • 17 Questions With Tim Travis of T&T Capital Management

    1. How and why did you get started investing? What is your background?


    When I was a teenager my Dad gave me the book the "Intelligent Investor" for me to read on a trip to Hawaii. For the first time investing, which had previously seemed a very abstract concept to me, made tangible sense. I found it so interesting that the relatively simple concept of value investing, which has been used by so many successfully, was the furthest thing from the status quo on Wall Street. I have a naturally contrarian personality so value investing was a great fit for me.

      


  • Does the Increase in Volatility Signal a Dangerous Market Environment?

    Over the last several weeks stock price volatility has increased significantly above norms. All of a sudden it is not uncommon to see stock prices moving 5%, 10% or more in a single trading day. Interestingly, this volatility is occurring both to the upside and the downside. Common sense would suggest that the intrinsic value of a business cannot change by those orders of magnitude from one day to the next. Logic dictates that the market is either inaccurately pricing the stocks now or it was incorrectly pricing them the day before.


    Stock price volatility is an unavoidable and undeniable reality. The stock market is an auction, and as a result, prices are continuously fluctuating up and down. Of course, that is stating the obvious because every investor in common stocks surely understands the associated daily volatility. However, my experience in talking with investors suggests that not every common stockholder embraces the complete unpredictability of stock price movements in the short run.

      


  • T Rowe Price Equity Income Fund Seeks Strong Value in 3rd Quarter

    During the third quarter, the T Rowe Price Equity Income Fund (Trades, Portfolio) took a position in KeyCorp (NYSE:KEY) and tripled its stake in Johnson Controls International PLC (NYSE:JCI). Additionally, the fund trimmed its position in General Electric Co. (NYSE:GE) and Bank of America Corp. (NYSE:BAC). These transactions align with the mutual fund’s value-oriented investment approach.


    Introduction to the fund and its investing strategy

      


  • Whitman Adds to 3 Positions in 3rd Quarter

    Martin Whitman (Trades, Portfolio), founder and portfolio manager of the Third Avenue Value Fund and adjunct faculty member at Yale’s School of Management, added to three positions in the portfolio in the third quarter. It was the fewest quarterly additions the guru has made since the third quarter of 2013.


    The largest addition was to Johnson Controls International PLC (NYSE:JCI), a producer of auto parts and heating/ventilation/air conditioning equipment with offices in Wisconsin and Ireland. The purchase of 232,800 shares for an average price of $43.6 per share elevated the position by more than 71% with a 0.95% impact on the portfolio.

      


  • Martin Whitman's Top Recent Investments

    Martin Whitman (Trades, Portfolio) is the founder and portfolio manager of the Third Avenue Value Fund. During the third quarter, the guru traded some stocks. The following are the ones with the highest performance.


    Amgen Inc. (NASDAQ:AMGN)

      


  • Martin Whitman Exits Baxalta in 3rd Quarter

    Martin Whitman (Trades, Portfolio) is the founder and portfolio manager of the Third Avenue Value Fund (TAVFX). He manages a portfolio composed of 36 stocks with a total value of $1,127million. During the third quarter, the guru’s largest sales are as follows:


    The investor exited his stake in Baxalta Inc. (NYSE:BXLT) with an impact of -1.62% on the portfolio.

      


  • Third Value Fund Avenue Buys 3 Stocks in 3rd Quarter

    Third Avenue Management (Trades, Portfolio) reported owning three new stocks in the third quarter, all from the pharmaceutical sector.


    The firm, founded by noted investor Martin Whitman (Trades, Portfolio), managed $6.3 billion as of Dec. 31 and returned 6.45% in its Value Fund for the calendar year through July 31, versus 7.65% for the S&P 500. The fund’s managers described their third-quarter trading activity in their recent letter:

      


  • Third Avenue International Value Fund Portfolio Manager 3rd Quarter Commentary

    Dear Fellow Shareholders:


    We are pleased to provide you with the Third Avenue International Fund (the "Fund") report for the quarter ended July 31,2016.

      


  • Third Avenue Small-Cap Value Fund Comments on Seaboard Corp

    We actually initiated our investment in Seaboard Corporation (SEB) ("Seaboard") with a small weighting at the end of 2Q16 and continued to build our position in 3Q16. Seaboard is a diverse global agribusiness and transportation company. In the U.S., Seaboard is primarily engaged in pork production and processing as well as ocean cargo shipping. Overseas, Seaboard engages in commodity merchandising, grain processing, sugar production and electric power generation. Seaboard also has a 52% interest in the turkey company Butterball, a brand very well-known to many consumers in the U.S.


    Despite what we see as high investor neglect of Seaboard due to low name recognition among most investors, we were drawn to the company by the stable demand for its products and services and its impressive asset portfolio, which has allowed Seaboard to compound its book value at double-digit rates over the long-term. The opportunity to invest was presented largely due to a challenged 2015 for the company when industry pork production outgrew demand. This resulted in a decline in pork prices and weighed on the company's profits and stock price.

      


  • Third Avenue Small-Cap Value Fund Comments on SP Plus

    After merging with Central Parking in 2013, effectively doubling its size, SP Plus (NASDAQ:SP) ("SP") is now the largest parking company in the U.S. In its main business, which contributes about 72% of total EBITDA, SP Plus manages 3,900 parking facilities encompassing some 2 million parking spaces in 346 cities around the country. Its clients include property owners and institutions such as municipalities, corporations, hotels, hospitals and universities. The company earns fees based on its general parking and labor management expertise. The revenue base is very stable because most of the contracts are independent of volume. SP leases about 20% of the garages and assumes all business risks. In its corporate name, the word "Plus" refers to related services like managing airport parking and


    We like this company because of its cash flow stability, consolidation opportunities for stronger players, and economies of scale. Some 90% of contracts are renewed each year. Since the company collects money from parkers upfront and keeps its share before submitting the remaining to clients, the business doesn't require working capital. While it is the largest player, SP's market share is only about 10%, which leaves plenty of opportunity for growth through mergers and acquisitions. Being larger helps establish brand names and also offers advantages on schedule optimization and purchases.

      


  • Third Avenue Small-Cap Value Fund Comments on Fiesta Restaurant Group

    Fiesta Restaurant Group (NASDAQ:FRGI) ("Fiesta") was spun-off from Carrols Restaurant Group in 2012 and now operates two restaurant brands, Polio Tropical and Taco Cabana. Both brands have had success in core markets, with 85% of Polio Tropical's restaurants in Florida and 99% of Taco Cabana's in Texas. The company is now expanding into other regions. Both restaurants are well-positioned to benefit from the healthy diet trend. Polio Tropical is one of the fastest growing ethnic food choices over the past 15 years as it takes advantage of diners' growing demand for Caribbean cuisine. Taco Cabana offers freshly prepared and authentic Mexican food and many of its restaurants are open 24 hours a day.


    Restaurant-level results have been outstanding. Polio Tropical's average annual sales per restaurant are $2.6 million. Taco Cabana's $1.9 million per restaurant compares favorably to much larger competitors Chipotle and Qdoba. The company plans to expand its current small footprint (344 locations for the two restaurants combined, split evenly at 172 locations apiece), by adding 8-10% to its store base every year. Unlike many of its peers, Fiesta's balance sheet is healthy. It hasn't overindulged in debt to fund its expansion. The company has a history of generating ample operating cash flow and compounding book value.

      


  • Third Avenue Small-Cap Value Fund Comments on G-III Apparel Group

    G-I I I (NASDAQ:GIII) Apparel Group ("G-I I I") is a designer, manufacturer, and marketer of men's and women's apparel. While not a household name, the numerous brands G-111 works with very much are, including Calvin Klein and Tommy Hilfiger. G-I I I was founded in the 1950s and today is one of the larger companies in the apparel industry with more than $2 billion of annual sales and a remarkable track record.


    Perhaps the aspect that attracted us most to G-111 is its increasingly strong opportunities for growth. In particular, it was recently awarded the license for the Tommy Hilfiger North America women's line. Hilfiger's licensor, PVH Corp., awarded G-I II the license in recognition of the strong growth G-111 has been able to generate for Calvin Klein. PVH awarded the Klein licenses to G-Illover the last decade, and if past is prologue, Hilfiger could be a billion dollar sales opportunity for G-I II. G-I II has also added other prominent brands to its portfolio, including Karl Lagerfeld and G.H. Bass, some licensed and some fully owned. Company management believes Lagerfeld and Bass alone represent an opportunity to grow G-Illsales about a billion dollars over the coming years. Simultaneously, e-commerce represents a large opportunity for G-111as it is very actively expanding business through the websites of department stores and Amazon, unlike many of its apparel peers.

      


  • Third Avenue Fund Comments on LivaNova

    Livallova

    Investor neglect can be a source of new ideas while also providing an element of downside protection. We found this combination to be compelling in our purchase of Livallova (NASDAQ:LIVN), which is the new name for Sorin and Cyberonics post their late-2015 merger. We think investor neglect was paramount, for Sorin, an Italian company, which merged with Cyberonics, based in Houston, changed its name and reincorporated in London. Indeed, we came across the company on a screen of our potential universe of companies, and had to do some digging into the new name we did not recognize, to realize the potential for these two well-known companies and the significant potential their merger offers.

    Livallova is a healthcare company with a $3 billion market capitalization that holds leading positions in cardiac surgical equipment, surgical heart valve replacement, neuromodulation and cardiac rhythm management. In its cardiac surgery division, Livallova holds number one positions in Oxygenators and Heart Lung machines. It also is rapidly gaining share with its new sutureless Perceval heart valve, with a history of successful procedures in Europe and recently approved in the U.S. In Neuromodulation, Livallova holds the number one position in devices for the treatment of drug resistant epilepsy, led by its success with its AspireSR device. Livallova is also rapidly gaining share in cardiac rhythm management with Kora250 and Platinium in Japan and Europe, while retaining options on strategies to re-enter the U.S. market. In all, Livallova holds number one positions in over 60% of its revenues.

    Livallova also has a strong self-help profile, with targeted synergies from its merger of $80 million over three years. As of its second quarter earnings call, Livallova indicated it was ahead of the first phase of $19 million expected in 2016. Creditworthiness for the company is easily demonstrated by net debt of roughly $75 million.

    The ability to compound earnings and book value growth is not only supported by its new product introductions and merger synergies, but also its compelling research and development pipeline, which Livallova refers to as its New Ventures unit. In this unit, Livallova is pursuing groundbreaking new technologies in percutaneous mitral valve repair and replacement, the adaption of its Neuromodulation technologies for treatment of central and obstructive sleep apnea and also the potential to treat heart failure through vagus nerve stimulation. Not only is the potential market opportunity for all three of these areas separately in excess of a billion dollars, but through its merger, Livallova has multiple research efforts in each area to evaluate, streamline and prioritize.

    Brexit created a window to initiate a position at under $50 per share for the Fund, which represents a compelling 50% upside to our fair value NAV target. Perhaps due to investor neglect on the name, Livallova trades at a substantial discount to its U.S. peers. We think this discount and its relatively smaller market capitalization also provide downside protection, for the company would likely be attractive to a larger entity looking to expand its product franchise.


    From Third Avenue Value Fund's third quarter 2016 letter.

      


  • Third Avenue Fund Comments on Amgen

    Livallova

    Investor neglect can be a source of new ideas while also providing an element of downside protection. We found this combination to be compelling in our purchase of Livallova (NASDAQ:LIVN), which is the new name for Sorin and Cyberonics post their late-2015 merger. We think investor neglect was paramount, for Sorin, an Italian company, which merged with Cyberonics, based in Houston, changed its name and reincorporated in London. Indeed, we came across the company on a screen of our potential universe of companies, and had to do some digging into the new name we did not recognize, to realize the potential for these two well-known companies and the significant potential their merger offers.

    Livallova is a healthcare company with a $3 billion market capitalization that holds leading positions in cardiac surgical equipment, surgical heart valve replacement, neuromodulation and cardiac rhythm management. In its cardiac surgery division, Livallova holds number one positions in Oxygenators and Heart Lung machines. It also is rapidly gaining share with its new sutureless Perceval heart valve, with a history of successful procedures in Europe and recently approved in the U.S. In Neuromodulation, Livallova holds the number one position in devices for the treatment of drug resistant epilepsy, led by its success with its AspireSR device. Livallova is also rapidly gaining share in cardiac rhythm management with Kora250 and Platinium in Japan and Europe, while retaining options on strategies to re-enter the U.S. market. In all, Livallova holds number one positions in over 60% of its revenues.

    Livallova also has a strong self-help profile, with targeted synergies from its merger of $80 million over three years. As of its second quarter earnings call, Livallova indicated it was ahead of the first phase of $19 million expected in 2016. Creditworthiness for the company is easily demonstrated by net debt of roughly $75 million.

    The ability to compound earnings and book value growth is not only supported by its new product introductions and merger synergies, but also its compelling research and development pipeline, which Livallova refers to as its New Ventures unit. In this unit, Livallova is pursuing groundbreaking new technologies in percutaneous mitral valve repair and replacement, the adaption of its Neuromodulation technologies for treatment of central and obstructive sleep apnea and also the potential to treat heart failure through vagus nerve stimulation. Not only is the potential market opportunity for all three of these areas separately in excess of a billion dollars, but through its merger, Livallova has multiple research efforts in each area to evaluate, streamline and prioritize.

    Brexit created a window to initiate a position at under $50 per share for the Fund, which represents a compelling 50% upside to our fair value NAV target. Perhaps due to investor neglect on the name, Livallova trades at a substantial discount to its U.S. peers. We think this discount and its relatively smaller market capitalization also provide downside protection, for the company would likely be attractive to a larger entity looking to expand its product franchise.


    From Third Avenue Value Fund's third quarter 2016 letter.

      


  • Third Avenue Fund Comments on Amgen

    Amgen (NASDAQ:AMGN), which was founded in 1980, is one of the world's leading biotechnology companies. Interestingly, the biotech industry has matured over the years and some of the companies generate stable cash flows, not unlike some of the larger pharmaceutical companies. Amgen is one of these. Competitive issues, largely surrounding the biosimilar debate, have put pressure on Amgen's stock. Post-Brexit market volatility provided us an opportunity to acquire shares.

    Amgen has a diversified product portfolio across six therapeutic areas: oncology/hematology, cardiovascular disease, inflammation, bone health, nephrology and neuroscience. Its key products are Enbrel for long-term inflammatory diseases such as rheumatoid arthritis; Epogen and Aranesp for anemia; Neupogen and Neulasta for treating neutropenia (a lack of certain white blood cells caused by cancer, bone marrow transplant, or after chemotherapy). Newer drugs include Repatha, which targets high cholesterol for the roughly 20% of the population who are intolerant of statins (the typical first line treatment), and Kyprolis for multiple myeloma, an incurable bone cancer. Its pipeline consists of 31

    preclinical and clinical targets, 12 of which are in the later stages. Amgen also has a pipeline of 9 biosimilars, of which 3 are in late stage and for which the worldwide sales of the originator drugs totaled approximately $54 billion in 2015.

    The company generated $9 billion in operating cash flow in 2015, up from $5.1 billion in 2011. The company has used its excess cash flow to fund growth as well as return cash to shareholders via both share buybacks and dividends. It expects to return 60% of adjusted net income to shareholders by 2018.

    Amgen has longer-term opportunities for margin improvement from synergies and cost controls. The company initiated a large-scale "transformation" program in 2013 to focus on efficient allocation of resources. The plan included an approximately 23% reduction in its facilities footprint and a 20% reduction in headcount by the end of 2015, with a goal of generating $1.5 billion of annual savings and a 15-point increase in adjusted operating margin by 2018. So far, the company's adjusted operating margin has increased from 38% in 2013 to 48% in 2015 and 55% in 1Q16. Management believes it is on a path to achieve 52-54% by 2018. In addition, the company's new next-generation bio-manufacturing facility is on track. The facility is expected to increase bulk production capabilities at a quarter of capital costs, 1/3 of operating costs and 2x speed vs. conventional facilities, resulting in an estimated cost reduction of 60%+ per gram of protein.

    Competitive threats confront any company and even more so for biotech and pharma companies as their products face patent expirations. Biosimilar products are newer to the marketplace and the regulatory pathway is still evolving, with questions of interchangeability with the branded drug still progressing. Biologics are scientifically more challenging than small molecule generic development, more costly to develop and require high-quality complex manufacturing. Price discounting to date has been substantially less than small molecule generics, but may vary over the longer-term. As such, we look to acquire shares at a reasonable estimate of the company's base business without giving much credit to the pipeline. We believe this provides downside protection for the competitive threats while providing opportunity for upside given the growing pipeline. We took advantage of volatility during the quarter to acquire shares of Amgen common at around a 25% discount to our estimate of NAV.


    From Third Avenue Value Fund's third quarter 2016 letter.

      


  • Third Avenue Small-Cap Value Fund 3rd Quarter Portfolio Manager Commentary

    Dear Fellow Shareholders:


    We are pleased to provide you with the report of the Third Avenue Small-Cap Value Fund (the "Fund") for the quarter ended July 31,2016.

      


  • Third Avenue Value Fund 3rd Quarter Letter

    Dear Fellow Shareholders:


    We are pleased to provide you with the Third Avenue Value Fund's (the "Fund") report for the quarter ended July 31, 2016.

      


  • Martin Whitman’s Third Avenue Management Purchases 8 Stocks

    Martin Whitman (Trades, Portfolio)’s investment firm Third Avenue Management (Trades, Portfolio) bought eight new stocks in the second quarter.


    They have a portfolio of 114 positions that together have a value of $2.45 billion. Half are companies in the real estate sector (27%) and financial services sector (22.3%). The firm is guided by a value-driven investment philosophy.

      


  • Chip Rewey Cuts General Motors Position in Half

    Third Avenue Value Fund manager, Robert “Chip” Rewey, slashed 696,700 shares of General Motors (NYSE:GM), a 53% reduction to his position, during the second quarter. The sell had a -1.75% impact on the Third Avenue Value Fund portfolio.


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  • Third Avenue Management Buys 6 Stocks in Second Quarter

    Third Avenue Management (Trades, Portfolio) has based its investing on value-driven, bottom-up principles since a recognized leader in the field, Martin Whitman (Trades, Portfolio), founded it in 1986. The firm frequently files its quarterly portfolio update ahead of the deadline of 45 days past the end of the quarter and before many other investors. Third Avenue reported buying one new stock and buying more shares of five of its existing holdings on Thursday, the final day of the second quarter.


    Whitman, chairman of Third Avenue, already posted his second-quarter thoughts in a letter on April 30, where he primarily reflected on the shortcomings of one of the central pieces of his investing strategy: buying growth in net asset value at a discounted price. Namely, managements of well-financed companies are in 2016 often hording cash at the expense of getting returns on it or are apathetic because they do not own any stock or have Wall Street pressure.

      


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