Martin Whitman

Martin Whitman

Last Update: 01-09-2017
Related: Third Avenue Management

Number of Stocks: 36
Number of New Stocks: 2

Total Value: $1,084 Mil
Q/Q Turnover: 3%

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

Martin Whitman Watch

  • Third Avenue Management Comments on Petroleum Geo-Services

    Petroleum Geo-Services ("PGS") (OSL:PGS) Throughout December and early January, PGS completed its refinancing activities as described in our previous letter. PGS conducted an equity raise primarily for the purpose of refinancing its 2018 bonds. The Fund was a holder of both PGS equity and its 2018 bonds. We were pleased to participate in improving PGS’ capital structure via the equity offering, which precipitated a meaningful price appreciation of both our equity and credit positions. PGS tendered for our 2018 bonds PGS on terms favorable to bondholders, and meanwhile the company’s equity responded very favorably to the improvement in the company’s capital structure and the elimination of its nearest debt maturity. Our investments in PGS securities have been important contributors to performance of late.

      


  • Third Avenue Management Comments on Lundin Mining

    Lundin Mining (“Lundin”) (TSX:LUN) In mid-November, Lundin announced that it had entered into an agreement to sell its holding in an entity called TF Holdings Ltd. TF is the entity through which Lundin and Freeport-McMoRan have for many years controlled a Central African copper mine called Tenke Fungurume. The Lundin transaction essentially is the sale of a 24% economic interest in the mine for the agreed price of CAD 1.14 billion. This transaction is expected to close during the first half of 2017 and would add considerable cash to what is already one of the mining industry’s best balance sheets. While Tenke Fungurume is an unusually high quality mine, its jurisdiction can at times be an unusually challenging place to do business. We view the transaction price as reasonable and look positively upon the prospective reduction of political risk embedded within Lundin. With the transaction proceeds Lundin would also bolster its position as one of the very few companies in a position to acquire mining assets at one of the rare times when some very decent assets may be available for sale.

      


  • Third Avenue Management Comments on Lundin Mining

    Lundin Mining (“Lundin”) (TSX:LUN) In mid-November, Lundin announced that it had entered into an agreement to sell its holding in an entity called TF Holdings Ltd. TF is the entity through which Lundin and Freeport-McMoRan have for many years controlled a Central African copper mine called Tenke Fungurume. The Lundin transaction essentially is the sale of a 24% economic interest in the mine for the agreed price of CAD 1.14 billion. This transaction is expected to close during the first half of 2017 and would add considerable cash to what is already one of the mining industry’s best balance sheets. While Tenke Fungurume is an unusually high quality mine, its jurisdiction can at times be an unusually challenging place to do business. We view the transaction price as reasonable and look positively upon the prospective reduction of political risk embedded within Lundin. With the transaction proceeds Lundin would also bolster its position as one of the very few companies in a position to acquire mining assets at one of the rare times when some very decent assets may be available for sale.


     

      


  • Third Avenue Management Comments on Global Logistic Properties

    Global Logistic Properties (“GLP”) (SGX:MC0) We have been satisfied owners of GLP for some time. From an execution standpoint, this logistics facility developer, owner and operator continues to do a fine job operationally. The company has judiciously grown its facilities network in China, Japan, Brazil and the U.S., both organically and through acquisition, at a pace appropriate for each respective geographic market while maintaining a conservative balance sheet. Meanwhile, the company has made great strides in growing its fund management platform, which has the benefit of improving overall returns through the incorporation of fee-paying third party capital. However, the stock had until recently languished at a low valuation presumably as a result of the broad perception that macroeconomic growth in China is slowing and that the growth of GLP’s network development will also slow in turn. Yet investors fixated on rapid growth of earnings fail to appreciate the value of the existing in-place network of facilities, a reasonable replacement cost analysis of those assets, the extreme difficulty in replicating the assets and the long-term secular drivers that are likely to make the assets increasingly critical and valuable over time. On the other hand, these concepts appear to be better appreciated by potential acquirers of GLP. In early November, it was widely rumored that a consortium of buyers had approached GLP with an interest in purchasing the company. One month later the company disclosed that it had opted to undertake a strategic review to identify means by which shareholder value could be enhanced. It was also disclosed that investment bankers had been hired for that purpose. We believe GLP’s assets and platform to be of exceptional quality and without rival in Asia. We suspect that GLP’s apparent willingness to entertain a transaction is likely to bring forth a number of potential buyers. In reaction to the above-mentioned rumors and press releases, shares of GLP appreciated by 24% in Singapore dollar terms during November and December.


     

      


  • Third Avenue Real Estate Value Fund 4th Quarter Commentary

    Dear Fellow Shareholders:


    We are pleased to provide you with the Third Avenue Real Estate Value Fund’s (the “Fund”) report for the quarter ended December 31, 2016. This quarter marks an abbreviated period as the Third Avenue Funds have elected to circulate our quarterly letters on a calendar year-end going forward (previously October 31) to more closely align with the reporting periods for a number of the Funds’ stakeholders. For the year ended December 31, 2016, the Fund returned +5.82% (net of fees)¹ versus +4.99% (before fees) for the Fund’s most relevant benchmark, the FTSE EPRA NAREIT Developed Index². While the Fund outperformed for the calendar year, Fund Management remains most focused on long-term performance where it has also exceeded the index, earning an +10.63% annualized return since its inception in 1998.

      


  • Third Avenue International Value Fund 4th Quarter Letter

    Dear Fellow Shareholders:

    With this investment letter, Third Avenue Management (Trades, Portfolio), including the Third Avenue International Value Fund, transitions to a calendar quarter shareholder letter schedule. We make this change in order to align more closely with interested financial intermediaries, many of whom have calendar quarter reporting requirements. It is our hope to better serve our fellow shareholders by making this transition. We have historically made these communications following the Funds’ fiscal quarters, the most recent of which concluded on October 31st. Therefore, this letter serves as an update for the two month “stub” period beginning November 1st and ending December 31st.  


  • Arnold Van Den Berg Axes 3 Positions in 4th Quarter

    Arnold Van Den Berg (Trades, Portfolio), founder of Century Management, invests in companies that trade 40% to 65% below the company’s intrinsic value. During the fourth quarter, Van Den Berg eliminated his positions in General Motors Inc. (NYSE:GM), US Bancorp (NYSE:USB) and Avid Technology Inc. (NASDAQ:AVID) as these companies have low value potential in early 2017.


    General Motors

      


  • Martin Whitman Invests in Homebuilder in 4th Quarter

    Martin Whitman (Trades, Portfolio), founder and portfolio manager of Third Avenue Value Fund, bought two new holdings in the fourth quarter (ended Oct. 31, 2016), but most of his activity involved reducing positions.

    One of his new buys – Lennar Corp. (NYSE:LEN) – was the guru’s largest transaction of the quarter. He purchased 571,000 shares of the Miami-based homebuilder for an average price of $44.38 per share. The deal had a 2.2% impact on the portfolio.  


  • Third Avenue Value Fund Buys 2 Stocks and Adds to 2 Positions in Q4

    Third Avenue Management (Trades, Portfolio), a private investment firm founded by legendary value manager Martin Whitman (Trades, Portfolio), ends its quarter on Oct. 31 and revealed the fourth-quarter trades of its Third Avenue Value Fund in its recent letter.

    The leader portfolio manager on the value fund is Chip Rewey. The firm’s philosophy focuses on fundamental, bottom-up research in a hunt for companies with strong capitalization, potential to compound value and shareholder-oriented management. They purchase when the companies trade at a discount to their net asset values.  


  • Third Avenue Focused Credit Fund Letter a Year After Starting Wind Down

    Dear Fellow Shareholders,


    As we wrote to you in our letter dated November 29, 2016, the Third Avenue Focused Credit Fund (the "Fund" or "FCF") recently paid its fourth liquidating distribution. Fund management has continued the orderly wind down of FCF and cumulative distributions now account for approximately 40% of the Fund's total assets since FCF announced its plan of liquidation on December 9, 2015.

      


  • Third Avenue Management Comments on Korn Ferry International

    Many of you may recognize the strong brand name of Korn Ferry International (NYSE:KFY), another purchase in the quarter, but you may not have noticed the business transformation the company has undertaken anchored by its December 2015 purchase of the Hay Group. Korn Ferry is best known for its executive recruiting. It is a top brand name in this highly fragmented industry, with a strong offering on the more resilient and niche C-suite space. Most of its job searches have annual compensation of $300,000 or more.


    With the acquisition of the Hay Group, Korn Ferry has leveraged this valuable network at the C-suite level and brought critical mass to its human resources advisory businesses. The goal is to engage more with its corporate clients beyond placing top level personnel and to provide a more stable revenue stream than a purely search-driven business model. When acquired, Hay Group earned an uninspiring 8% on its revenue, or $40 million in EBITDA. 11 months after the integration, the Hay Group has begun to deliver on its projected benefits and synergies. We estimate that Hay's EBITDA margin already improved from 8% to 12%, and should continue to grow to 15-16% over the next two years.

      


  • Third Avenue Management Comments on Comfort Systems USA

    Beyond a strong balance sheet, other key characteristics that we look for in our companies include a strong business model and a large addressable market to support long-term revenue and earnings compounding. Our addition of Comfort Systems USA (NYSE:FIX) is a good example of these factors. Comfort Systems offers design, installation, retrofit and service for HVAC and electrical systems for facilities such as office buildings, plants, retail centers, hospitals and universities. Comfort Systems is unique in that it focuses mostly in smaller cities where, relative to large urban settings, there is less competition for both projects and for skilled labor. The company works on approximately 4,000 jobs annually and most of the contracts are under $1 million. More than half of these are for renovations and repairs and are recurring in nature, rather than from new constructions.


    The outlook for revenue growth is solid, as the aging existing HVAC stock in the U.S. should provide a good organic growth rate of approximately 3 to 5% annually over many years. We particularly like the management team's skillset in acquiring smaller competitors to add geographic coverage and achieve operational synergies. Management buys small, local competitors that earn only 2 or 3% operating margins (the margins are low in this business because they include pass-through equipment costs) and pay only 5-6X EBITDA. After overlaying Comfort Systems' buying power and operational standards, margins of the acquired companies normally double to 4-6% after a year, effectively cutting the purchase price in half. We think that a combination of a solid core business, operational leverage and large acquisition opportunities will provide higher sales and higher margins for many years. Net of cash, the company has no debt. At our purchase price of just over $28, we see solid upside to our mid-$30's estimate of fair value NAV, with a solid outlook for book value growth and a 6.2% free cash flow yield.

      


  • Third Avenue Management Comments on Cubic Corp

    Cubic Corp (NYSE:CUB), another top holding for the Fund, is a small company with about $1.1 billion in market cap that has three main businesses: military communication equipment, military training (for example, they run the Top Gun flight school), and in our view the most interesting part is its transportation segment. The company's transportation segment is the world leader in design and management of public bus and subway systems, handling the fare systems for major cities such as London, New York City, Chicago, and Vancouver. Cubic is also leading technology efforts, such as smart phone payments and dynamic re-routing, to help keep us all on time for work.


    The company meets all of our requirements, with low (and declining) financial leverage, highly visible means to compound earnings and book value growth. And, at $43 per share, we think the stock is very under-valued, with upside to north of $60 within a couple of years.

      


  • Third Avenue Management Comments on Multi-Color Corporation

    Multi-Color Corporation (NASDAQ:LABL) 1 is a good example of a name that is not in our benchmark and is a high conviction top ten holding for the Fund. The company produces numerous types of labels for a variety of consumer products, such as detergent, wine bottles, motor oil, etc. Multi-Color meets the tenets of our investment philosophy of creditworthiness, book value compounding and a discounted valuation.


    On the first tenet, Multi-Color has manageable debt. Our companies must have the wherewithal to weather economic cyclicality as well as the ability to take advantage of opportunities within their industry. Excessive debt brings more than financial risk. Many companies have declined in value not because they could not repay their debt, but because they did not have left over money to reinvest to develop new products or keep up with innovations.

      


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

    Dear Fellow Shareholders:


    On November 10th, we were excited to host Third Avenue's 19th Annual Value Equity Conference. It was a pleasure to see and speak with all of you that attended. As we reflect on the quarter and the conference, we want to share some thoughts from the day for those of you who could not attend.

      


  • Third Avenue Value Fund 4th Quarter Portfolio Manager Commentary

    Dear Fellow Shareholders:


    We hosted Third Avenue's 19th annual Value Conference in November. We were thrilled to see and speak to many of you at the conference, and for those of you who were unable to attend, we thought it might be interesting/instructive to share highlights of our discussion.

      


  • 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.

      


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