Martin Whitman

Martin Whitman

Last Update: 06-30-2016
Related: Third Avenue Management

Number of Stocks: 35
Number of New Stocks: 1

Total Value: $1,203 Mil
Q/Q Turnover: 3%

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

Martin Whitman Watch

  • 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.

      


  • Third Avenue Value Fund Purchases Stake in Johnson Controls

    Third Avenue Value Fund purchased a 325,700-share stake in Johnson Controls Inc. (NYSE:JCI) on April 30.


    Milwaukee-based Johnson Controls is a global technology and industrial leader serving customers in more than 150 countries. The company invented the first electric room thermostat in 1885; since then it has been using the principles of delivering innovative products that help the world run in an efficient, rational and safe manner. The company creates products, services and solutions to increase energy efficiency and lower operating costs for buildings worldwide. The company also creates batteries and energy storage — including advanced batteries for hybrid and electric vehicles as well as stationary energy storage.

      


  • Thoughts on the Brexit - Third Avenue Management

    On June 23, 2016, the United Kingdom held a referendum which resulted in the majority of voters expressing a will for the United Kingdom to sever its existing arrangement with the European Union (“EU”). By voting to abandon the existing terms of its relationship with the EU, the referendum result has opened a host of European economic and sovereignty considerations which are likely to linger for some time. Uncertainty will be the norm as the long-term impacts of Brexit unfold.

    At Third Avenue Management (Trades, Portfolio) we have steered through political and macroeconomic upheaval in our more than 30 years of investing. Events similar to “Brexit” in terms of shock value are simply facts of life for investors. As a result of these hard-earned experiences we have learned not to rely upon specific macroeconomic forecasts but instead strive to prepare for the unexpected. In this pursuit we favor companies with strong financial positions, modest valuations, and are mindful of fundamental risks such as currency mismatches. While these approaches do not fully minimize short-term stock price volatility, they do, in our view, reduce fundamental risks which could lead to permanent impairment of our capital. We also strive to exercise prudence with regard to position sizing and geographic and industry exposures.  


  • Answers to the Hardest Question: When Do I Sell a Stock?

    The most common complaint I have heard from investors over my 40-plus years in the financial services industry is as follows: "Everyone wants to tell me what to buy and when, but no one ever tells me when to sell."


    Consequently, it seems to me that whether you are a novice investor or a grizzled old veteran, the decision as to when to sell a stock is the most difficult decision investors have to make.

      


  • Third Avenue Comments on Visteon Corp

    An example of one of our portfolio holdings which has had, and continues to have, opportunities for self-help is Visteon Corp. (NYSE:VC), a well-capitalized automotive electronics company. The stock was a top contributor to the Fund's performance during the quarter, with a total return of 19.1%.

    Visteon provides products to automotive OEMs (original equipment manufacturers) such as Ford, GM, Daimler, BMW, Nissan and Honda for their digital cockpits, i.e., the instrument cluster, information displays and infotainment - each of which has a presence in the connected car. Comparing today's cars to those just five years ago, the amount of additional functionality is amazing - from infotainment that connects to your smartphone to driver assistance safety features such as rear back-up cameras, collision detection, and blind spot and lane departure warnings. Integrated instrument clusters can be personalized if,for example, you'd rather see the weather than your tachometer. There are even over-the-air software upgrades where, instead of having to take your vehicle to the dealer for an update, the upgrade can happen seamlessly while you're asleep and your car is in your own driveway.

    The media is abuzz about self-driving cars and the car as an extension of people's mobile life. For the auto OEMs, having connectivity is a strategic differentiator and one that can be the deciding factor to a customer when choosing a particular car. Visteon is an enabler of connectivity with its cockpit electronics products - it enables the information to be gathered from various sources and displayed in the vehicle.

    Visteon's roots can be traced back to its role as an automotive supplier to Ford Motor, providing climate control systems, electronics and interiors. The company was spun off in 2000, but then fell upon difficult times during the financial crisis. It reorganized and emerged from Chapter 11 in 2010. Two years later, management embarked upon a path to shift to higher margin products, deciding to exit the commodity interiors business and ultimately deciding to sell its stake in its climate control business to focus solely on electronics. It is here that the Fund got involved with Visteon. Management sold its stake in the climate control business at an attractive 10x EBITDA valuation and committed to return a substantial portion of the proceeds to shareholders. It had also acquired the automotive electronics business from Johnson Controls to bolster its overall electronics business and was actively pursuing new business wins with OEMs as well as reaffirming its technological strength and longer-term roadmap to re-win existing platforms. Further, a new CEO, Sachin Lawande, was brought in. Sachin had previously been the president of the Infotainment division at peer company, Harman. Since his arrival at Visteon, he has brought in additional talent along with a greater focus on software development, a key driver for this business.

    Visteon continues on its path to building value. Even after a sizable capital return, the company maintains a net cash position. It remains focused on driving growth with its presence in the connected car. It has won business across various classes of vehicles from luxury to mid/entry level. It achieved its targeted cost synergies related to the acquisition of the JCI automotive electronics business ahead of plan, and has targeted reducing overhead costs further to improve margins. Adjusted EBITDA margins have improved from 7.2% in 2014 to 9.5% in 2015 and 11.9% in the first quarter of 2016.

    We remain excited about the prospects for growth at Visteon as it expands its presence in the connected car and believe the stock, at current levels, still represents significant upside to our estimated NAV.


    From Chip Rewey's second quarter 2016 Third Avenue Small-Cap Value Fund letter.

      


  • Third Avenue Comments on NetScout Systems Inc.

    NetScout Systems Inc. (NASDAQ:NTCT) Near-term concerns over a slowdown in carrier spending provided us an opportunity to acquire shares of NetScout common at a substantial discount to our estimate of NAV.

    NetScout is a well-financed provider of 24x7 network monitoring solutions to carriers and enterprises. Its offerings provide high-quality performance analytics that help its customers resolve technology issues that could negatively impact service quality and/or result in outages/downtime and compromised security. Last year, the company acquired certain communications assets from Danaher which doubled its addressable market by broadening its product offerings, providing an entrée into the cyber security space and increased its distribution. Cost synergies estimated at around $45-55 million are expected from the elimination of redundancies and economies of scale, with additional synergies generated over time as the company moves toward common infrastructure platforms, distribution and support programs.

    In the long term, demands for increasing amounts of data seem to continue unabated (not only Big Data but more and more use of streaming video!), requiring more monitoring and troubleshooting of network traffic which should benefit NetScout. For carriers, the cost of monitoring to keep existing customers happy with their service is a small price to pay compared to the cost to acquire new customers.


    From Chip Rewey's second quarter 2016 Third Avenue Small-Cap Value Fund letter.

      


  • Third Avenue Comments on Kennedy Wilson Holdings

    Kennedy Wilson Holdings, Inc. (NYSE:KW) During the quarter, the Fund was able to acquire shares of Kennedy Wilson Common at a substantial discount to our estimate of NAV, as the general market sell off, combined with unfounded fears of market liquidity for deals, pushed the stock down significantly.

    Kennedy Wilson Holdings (Kennedy Wilson) is a U.S.-based real estate operating company. The company is an integrated global real estate investment and services company with a $2 billion portfolio of investments in a diversified mix of commercial and residential assets. In addition, Kennedy Wilson has more than $18 billion of assets under management (AUM) on behalf of third parties.

    The management team owns 18% of the company's stock and has historically been a savvy capital allocator, having made substantial investments in Japan during the 1990s, in the U.S. following the financial crisis, and in Europe and the U.K. in more recent years. The template has been the same in all markets: invest capital in out-of-favor regions or property types at substantial discounts to underlying value, actively manage properties and add value during the holding period, realize profits over the long term, and recycle capital into new opportunistic investments. This model has produced a notable 10-year tangible book value growth CAGR of 13.5%. Our knowledge and due diligence of Kennedy Wilson was aided significantly in partnership with Third Avenue's Real Estate team, who have owned the stock since early in 2015.

    At our average cost of just over $17 per share, we not only have significant upside to our NAV estimate of $25, but also what we consider to be a "free option" on performance fees and monetization of low basis (and now entitled) land acquired in conjunction with income-producing properties. The company appears poised to generate sizable NAV growth as it expands third-party AUM and harvests profits (including promotes) from a series of the well-timed investments it made over the past several years.


    From Chip Rewey's second quarter 2016 Third Avenue Small-Cap Value Fund letter.

      


  • Third Avenue Comments on Interface Inc.

    Interface, Inc. (NASDAQ:TILE) Interface has been on our radar for some time and during the quarter its stock price reached a level we viewed as an attractive entry point, having declined more than 40% within the past few quarters due to investor concern around the company's level of growth. While we agree that growth in the short-term is likely to be muted, we believe the company's core product - modular carpet - is poised for long-term secular growth.

    Interface is the world's leading manufacturer of carpet tile. The strength of its brand and its reputation for service, quality, design and performance provide a competitive advantage. Interface's global manufacturing capabilities across four continents also provide an advantage in serving multinational corporate customers quickly and cost-effectively.

    Central to our thesis on Interface is the fact that carpet tile has reached the point where it is cost-competitive with traditional 'broadloom' carpet but offers numerous advantages, including efficiency in installation and replacement. In addition, the company is well-financed and well-managed, with a long-tenured management team.

    Having made our investment in the company at an undemanding valuation of 13-14x free cash flow and a substantial discount to our estimate of NAV,we believe the market is likely to assign Interface a higher valuation over time as commercial construction levels continue to improve and Interface continues its expansion overseas and into newer verticals such as education. Moreover, we would not be surprised to see Interface become an acquisition target itself if its current depressed valuation in the public markets persists.


    From Chip Rewey's second quarter 2016 Third Avenue Small-Cap Value Fund letter.

      


  • Third Avenue Comments on Carrizo Oil & Gas

    Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) Since our initial purchase in February, Carrizo Oil & Gas has been a strong performer. With a solid balance sheet and a significant drilling inventory,we see Carrizo as a multi-year compounder into recovering oil prices, however long that takes.

    Based in Houston, TX, Carrizo is an exploration and production company focused on oil and gas plays in the U.S. Its most important acreage is in the high quality core areas of the Eagle Ford shale in South Texas, the Delaware basin in the Permian in West Texas, and the Utica shale in Ohio. Carrizo's share price, like those of all oil and gas production companies, came under extreme price pressure in February, as the market sold off and investors feared sustained oil prices in the low-$20 per barrel range.

    Carrizo is unique from our perspective as a small cap company thanks to its high quality acreage (what we call good rocks) and a strong balance sheet. It fits our criteria for creditworthiness, with a disciplined hedging program to forward sell 50% of production, and a recently re-determined borrowing base on its $600 million revolving loan versus $50 million drawn.

    As for its acreage, Carrizo rocks aren't just good, their 88,000 acres in the Eagle Ford play in South Texas are great, with about 75% oil cuts and a PV103 break-even of $32.50 per barrel. Further, Carrizo has the ability to respond quickly to higher prices, with drilled but uncompleted inventory of 53 net Eagle Ford wells, which represents upwards of almost 12,000 barrels of oil equivalent production per day (B0Epd), or almost half of their current production run rate. With stronger prices, Carrizo has the balance sheet and the acreage to opportunistically increase production in 30 days through fracking and completing these wells. Moreover, it has a long horizon of drilling visibility with 53 planned Eagle Ford wells in 2016, vs. a base well inventory of 915 drilling locations and potentially an inventory of 2,100 locations with tighter spacing. Indeed, as good oil plays get better,

    Carrizo has the sweet spot acreage in one of the best.


    From Chip Rewey's second quarter 2016 Third Avenue Small-Cap Value Fund letter.

      


  • Third Avenue Comments on Cambrex Corp

    Cambrex Corp. (NYSE:CBM) We took advantage of the February sell off in the market to acquire shares of Cambrex at around $38 per share, an attractive discount to our estimate of NAV. We see the combination of a strong balance sheet and a healthy revenue outlook as supportive for book value growth to continue, given the dynamics of Cambrex's business.


    Cambrex is a well-financed specialty chemical company focused on life sciences; it develops and commercializes active pharmaceutical ingredients (APIs). Cambrex also produces Generic APIs, Controlled Substance APIs and is expanding into finished-dosage generic API manufacturing. Cambrex's API business is unique in that it manufactures the active ingredient in several leading pharmaceuticals and serves as a supplier to various drug companies. As such, it generates revenues from volumes sold and not price per finished pill. Cambrex's customers focus not only on product purity but also on quality, consistency and documentation of the manufacturing process ascompetitive attributes.


    Several long-term drivers support revenue growth for Cambrex.

      


  • Chip Rewey's Third Avenue Small-Cap Value Fund 2nd Quarter 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 April 30, 2016.

      


  • Martin Whitman's Third Avenue Funds 2nd Quarter Shareholder Letter

    Dear Fellow Shareholders:


    One conservative, but highly productive, approach to long-term common stock investing is to acquire issues which have the following characteristics:

      


  • Third Avenue Management Q2 2016 Value Fund Letter

    During the fiscal second quarter, oil prices rallied, credit markets improved and stock prices rebounded as macro fears were replaced by optimism. That trend followed a period when oil prices fell, credit markets deteriorated and stock prices sagged. And that followed a period when…well, you get the idea. There’s been no shortage of market volatility.


    Some may delight in trying to ride this bucking bronco of a market. But we have never been momentum jockeys. We are value investors, which means we care deeply about company fundamentals. We look for companies with strong management that can deliver long-term shareholder value regardless of macro trends or market movements. We buy securities of quality companies at attractive prices. We hold onto them. For a long time. And we don’t pay much attention to what markets may do in the interim, as long as our investment thesis remains intact.

      


  • Marty Whitman's Third Avenue Buys Lennar, Fidelity, Howard Hughes

    Marty Whitman, veteran investor and founder of Third Avenue Management (Trades, Portfolio), said in his recent shareholder letter that his team was “taking the opportunity to deploy capital in some of what we believe are the most unduly punished names in the portfolio as well as in new investment opportunities.” In the first quarter, he acted on seven of those opportunities.


    Whitman’s philosophy is to buy stocks of companies based on their credit worthiness, ability to compound book value and share price below intrinsic value. His holding period is about three to five years.

      


  • Third Avenue Buys Ralph Lauren, Boosts Baxalta

    Martin Whitman (Trades, Portfolio) is founder and former portfolio manager of the Third Avenue Value Fund. Chip Rewey now manages the fund after Whitman stepped down from active management duties. During the first quarter of the year, the fund bought many stocks and the following are the most heavily weighted.


    Third Avenue acquired 229,973 shares in Harman International Industries Inc. (HAR) with an impact of 1.45% on the portfolio.

      


  • Martin Whitman Takes Stake in Harman International Industries

    Martin Whitman (TradesPortfolio) purchased 229,973 shares of Harman International Industries Inc. (NYSE:HAR) in the first quarter.


    Harman International Industries designs and engineers connected products and solutions for automakers, consumers and enterprises worldwide, including connected car systems, audio and visual products, enterprise automation solutions and connected services with leading brands including AKG, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson and Revel. More than 25 million automobiles on the road are equipped with Harman audio and connected car systems.

      


  • Third Avenue Value Sells NVIDIA, Cavco

    Martin Whitman (Trades, Portfolio) is the founder of the Third Avenue Value Fund (TAVFX), which is now managed by Chip Rewey. The fund sold many stocks during the first quarter including the following.


    The fund reduced its stake in Cavco Industries Inc. (CVCO) by 30.57% and the deal had an impact of -2.46% on the portfolio.

      


  • Third Avenue Value Buys 2 Stocks With Short-Term Struggles

    Third Avenue Management (Trades, Portfolio)’s flagship fund, the Third Avenue Value Fund, is led by Chip Rewey and remains dedicated to its principles in value investing after founder Martin Whitman (Trades, Portfolio) stepped down from portfolio management in 2012.


    Year to date, the fund is up 0.04% through March 29. During the first quarter of fiscal 2016 ended Jan. 31, the fund added two new holdings to the portfolio.

      


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