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Third Avenue Management

Third Avenue Management

Third Avenue Management
Last Update: 2013-05-14

Number of Stocks: 132
Number of New Stocks: 18

Total Value: $5,204 Mil
Q/Q Turnover: 9%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:
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Third Avenue Management Watch

  • Third Avenue - 'The Impact of Higher Interest Rates on Real Estate (When and If It Happens)'

    by Holly LaFon - May 21, 2013
    April 2013

    By The Third Avenue Real Estate Value Team  Continue Reading »


  • Third Avenue Management Comments on ABM Industries

    by Holly LaFon - Mar 08, 2013
    ABM Industries (ABM) traces its beginnings back to 1909, when its founder Morris Rosenberg invested $4.50 in cleaning materials and began cleaning windows for shopkeepers in San Francisco. Over a century later, the company is the largest provider of janitorial services in the U.S. and – through a series of acquisitions – has branched into other service areas to offer a one-stop shop for facilities management. Today ABM provides engineering, janitorial, electrical, parking, landscaping and security services (stand-alone or bundled) to thousands of commercial, residential, and governmental customers throughout the U.S. and Canada.

    Shares of ABM have languished over the last two years in the wake of an ill-timed acquisition by the company – in December 2010 ABM bought another building-maintenance specialist named The Linc Group, a contractor whose business included the management of barracks in Iraq for the U.S. Government. With the swift withdrawal of U.S. troops in 2011 Linc's Iraq business has largely disappeared. Even so, Linc accounts for only about 12% of ABM's sales and the lost Iraq business was only 2% of ABM's total revenue by our estimates. We believe the untimely acquisition has helped afford us a rare opportunity to invest in a very strong company at attractive prices (around 7.5 times estimated EBITDA1 for this year). Ultimately, ABM still exhibits many of the elements we look for in our search for high-quality companies:  Continue Reading »


  • Marty Whitman’s Third Avenue Management Buys 3 New Stocks

    by Holly LaFon - Mar 07, 2013
    Third Avenue Management - Marty Whitman’s Third Avenue Management Buys 3 New Stocks Third Avenue Management was founded in 1986 by Martin J. Whitman, a staunch buy-and-hold value investor who currently serves as chairman of the board and portfolio manager. In his letter for the quarter ended Jan. 31, 2013, his strategy for the year was straightforward: “Investing in the common stocks selling at substantial discounts from net asset values (NAV) of companies which are eminently credit-worthy seems to make very good sense in 2013. Such investments ought to work out satisfactorily over the long term almost regardless of the global economic outlook.” Whitman’s firm also pays particular attention to balance sheet strength.

    The value of Third Avenue’s portfolio containing 39 stocks is $2.29 billion, and its stop three sector weightings are ETF, options, preferred; real estate; and financial services.  Continue Reading »


  • Third Avenue Management Comments on EnerSys

    by Holly LaFon - Mar 07, 2013
    EnerSys (ENS) had been on our watchlist for about a year before the Fund initiated a position this past quarter at a valuation approximating 10 times earnings and free cash flow. If past is prologue, management should continue compounding value at above-average rates through thoughtful acquisitions and organic growth, supported by growing demand for backup power systems and a continuing shift from combustion engines to electric motors for environmental and total cost of ownership reasons, particularly in developing markets. Meanwhile, a healthy balance sheet, the company's free cash flow, and an undemanding valuation create a significant "margin of safety" and protection on the downside.

    From Third Avenue Management's first quarter 2013 commentary.  Continue Reading »


  • Third Avenue Management Comments on Encana

    by Holly LaFon - Mar 06, 2013
    Fund Management added to its position in Encana Common (ECA) following the company's announcement of a C$2.2 billion joint venture with PetroChina (PBR). In this transaction, Encana sold a 49.9% non-operating stake in its undeveloped Duvernay land holdings in Alberta in exchange for C$1.2 billion in cash up front and C$1 billion in the form of a drilling carry that will result in PetroChina funding 75% of the development costs over the next four years. As a result, Encana ended the year with a very strong financial position that includes more than C$3 billion in cash.

    From Third Avenue Management's first quarter commentary.  Continue Reading »


  • Third Avenue Management Comments on NVIDIA

    by Holly LaFon - Mar 06, 2013
    Our primary attractions to NVIDIA (NVDA) are its leading market position in graphics processors (GPUs) and, more recently, the strides it has taken to address the growing mobile computing market (tablets and smart phones). Its tablet and smart phone offerings are based on ARM designs for low power applications, enabling us, as investors, to benefit from growth in the adoption of ARM designs, but at much more attractive pricing than buying ARM shares directly. The GPU market is being driven by an increasing demand for graphics due to increasing digital content design (e.g., videos, commercials, 3-D interactive content, product design) and are used heavily in work stations and supercomputers, where high-end computing is used for design and simulation.

    From Third Avenue Management's first quarter commentary.   Continue Reading »


  • Third Avenue Management Comments on Intel

    by Holly LaFon - Mar 05, 2013
    Intel (INTC) has built, over the years, a solid franchise in microprocessors (“IntelInside”) for PCs and has continued to enhance it through its technological and manufacturing leadership. Less obvious to many is Intel’s dominance in and profitability generated from the server market, where data center growth has been driven by demand for cloud infrastructure build outs. While Intel has struggled to capture share in the faster growing mobile markets versus the likes of Qualcomm, Apple, Samsung and others who utilize cheaper, lower power ARM-based designs (licensed from ARM Holdings plc, a British company), we believe there is substantial value in its core business. Over the longer term, there are a number of opportunities for growth: e.g., should an upgrade cycle be driven by Windows 8, should ultrabooks and/or other tablet hybrid computers takeoff, shouldPC growth in emerging markets accelerate. In the meantime, the stock pays a roughly 4.24% dividend; the Fund was able to acquire shares at around 4.6 times EBITDA and 10 times earnings.

    From Third Avenue Management's first quarter 2013 commentary.  Continue Reading »


  • Third Avenue Funds 2013 Quarterly Letter to Shareholders

    by CanadianValue - Mar 04, 2013
    Third Avenue Funds Jan 2013 Quarterly Shareholder Letter

      Continue Reading »


  • Third Avenue Management Becomes 5% Owner of Slavie Federal Savings Bank

    by Dianne Tordillo - Oct 26, 2012
    Third Avenue Management - Third Avenue Management Becomes 5% Owner Of Slavie Federal Savings Bank After reporting a purchase of 132,775 shares at the end of this year's third quarter, Third Avenue Management positions its ownership of Slavie Federal Savings Bank (SFBI) at 5 percent.

    Slavie Federal became a mutual holding company in Dec. 2004 after about 100 years of being a mutually owned institution. Headquartered in Maryland, it offers a variety of financial services including lending options, retirement planning and investment advice.  Continue Reading »


  • Third Avenue Management Comments on Newhall Holding Company

    by Holly LaFon - Oct 02, 2012
    Bankruptcy Emergence to Resource Conversion (Newhall Holding Company)

    It is wise to avoid borrowing money against assets that do not generate predictable cash flow. During the 2008-09 financial crisis, very few leveraged land owners escaped bankruptcy, foreclosure or restructuring. High quality assets with inappropriate debt levels create opportunities for distress investors to buy the fulcrum security (the most senior issue in a capital structure that will participate in a reorganization) at a discount to intrinsic value and then exert influence over the restructuring process. In 2008, the Fund acquired the senior secured bank debt of Landsource, which owned one of the most prime land banks in the U.S., with the expectation that we would influence and participate in the reorganization under a Chapter 11 bankruptcy proceeding. The company emerged from bankruptcy in 2009 with no debt (our debt securities were converted into equity). The Fund is one of the largest equity owners (approximately 9.5% of the outstanding equity) and has representation on the board of directors.  Continue Reading »


  • Third Avenue Management Comments on Weyerhaeuser

    by - Oct 02, 2012
    Reit Conversion to Future Potential Resource Conversions (Weyerhaeuser)

    Weyerhaeuser Common (WY) is an example of a security that offers multiple ways to win. The Fund initiated its investment in Weyerhaeuser Common at a significant discount to conservative estimates of NAV during a severe cyclical downturn in housing and forest products. Weyerhaeuser is one of the largest timberland owners in the U.S., with secondary businesses in homebuilding, wood products, and cellulose fibers. Our initial business plan was to invest prior to the company converting its structure into a real estate investment trust. Weyerhaeuser's timber REIT peers traded at much narrower discounts to NAV, notwithstanding our opinion that Weyerhaeuser had a superior financial position and owned higher-quality timberlands. We believed that upon conversion to a REIT, Weyerhaeuser Common would trade more in-line with its REIT peers. Additionally, once Weyerhaeuser's subsidiaries (homebuilding and wood products) returned to profitability, they could be candidates for resource conversions (e.g., spin-off or sale). Our initial assessment was correct. In a complex transaction, Weyerhaeuser converted into a REIT in mid-2010. Shortly thereafter, the price-to-value discount shrunk materially. Throughout the housing recession, Weyerhaeuser's cellulose fiber division continued to be profitable while its timber, housing and wood products divisions struggled. For the quarter-ended June 30, 2012, the wood products division had its best quarter in six years and the homebuilding division reported increased profits coupled with dramatic improvement in closings and backlog. With the housing market in the U.S. starting to show signs of a recovery, the company may now be in a position to consider spinning off its homebuilding and wood products divisions. While we believe these two divisions could be worth 15% to 20% of Weyerhaeuser's value, market participants seem to ignore their value because they have not generated consistent profits throughout the downturn. As a result, Weyerhaeuser Common is still undervalued based on private market comps in the timber industry, but with the U.S. housing recovery gaining momentum and Weyerhaeuser's business turning the corner, our patience appears to be paying off. Plus, with recent additions to the Board and upcoming management changes, resource conversion seems more imminent than it did at the time of our initial investment.  Continue Reading »


  • Third Avenue Management Comments on First Industrial Realty Trust

    by - Oct 02, 2012
    Equity Infusion to Turnaround Situation (First Industrial Realty Trust)

    The Fund initiated its investment in First Industrial Common (FR) during 2010. At the time, the U.S.-based REIT owned a diversified portfolio of industrial properties across the country, but it was priced as a high-probability reorganization candidate. Acknowledging the substantial headwinds facing the company, we took a view that its primary obstacles (too much debt and sub-optimal occupancy) were temporary and surmountable. Our initial business plan involved taking a position in the common stock and then offering to make an equity infusion (direct investment) at a discounted price (significantly below net asset value) to quickly remediate the high debt levels that restricted management's ability to execute on an occupancy recovery that would boost cash flows and create a virtuous value enhancement cycle. Management was against issuing highly-dilutive equity, choosing instead to reduce leverage gradually through diligent organic growth and by selling non-core assets. Management believed that a combination of postponing new developments, discontinuing common dividend payments, and a gradual economic recovery, would help the company steadily rebuild its cash flow over time, allowing for gradual debt reduction and value recovery in the shares. After detailed discussions with management, we supported the plan and adjusted our investment thesis to a more pedestrian-type turnaround. We scaled back our targeted position sizing based on the risk-adjusted return prospects. After two years in this investment we have substantial unrealized gains from our very attractive entry price. Management's path turned out to be successful. Leverage has declined, overall borrowing costs were reduced and occupancy gains have been impressive. The company has completed two equity offerings at prices substantially higher than our entry price. We anticipate the final milestones - reinstatement of the common dividend and resumption of value-enhancing development activity - will occur in the near future, which should be the catalyst for First Industrial Common to trade in-line with net asset value and its REIT peers.  Continue Reading »


  • Third Avenue Management Comments on Harman International

    by - Oct 02, 2012
    Harman International (HAR) is a leading provider of premium branded audio systems, consumer electronics and related technologies found in automobiles, homes and professional venues. Founded in the 1940s by Dr. Sydney Harman4, the company's rich history has produced not only a legacy of highly-regarded and familiar brands such as Becker, Harman/Kardon, JBL, Infinity, Lexicon and Mark Levinson, but also more than 4,000 patents. By 2007, those brands and an enviable growth record attracted the attention of private equity sponsors KKR and Goldman Sachs who proposed and subsequently walked away from a highly-levered transaction that valued the company at $8 billion. The company's growth driver within the auto segment had temporarily fizzled, challenged by cheaper alternatives. The onset of the financial crisis forced the company's newish CEO, Dinesh Paliwal, to cut costs and adopt a more competitive business model. We first looked at Harman Common in 2009 in the aftermath of the failed buyout and have tracked the company's development since. Today, Harman continues to benefit from management's restructuring efforts, including a revamped and somewhat revolutionary and controversial approach to R&D.5 If the company's recently awarded auto business, which today totals more than $16 billion, is any indication, it appears management has struck a pleasing chord with a customer base that is notoriously risk averse and difficult to please. The company's infotainment systems are not only found in the world's most luxurious automobiles such as Ferrari, BMW and Mercedes, but also in those of developing OEMs such as Geely of China and Tata of India. Harman's automobile infotainment systems appear to sit in the sweet spot of increasing demand for both connectivity and safety. We expect that, along with a growing top line, the company's current order book will generate improving margins at the same time that management aggressively manages its cost structure. Based on the Fund's cost basis, which equates to roughly six times 2012 EBITDA, we believe we have identified a "growth" stock trading at a significant discount to intrinsic value.

    From Third Avenue's third-quarter letter, by Curtis R. Jensen, chief investment officer and portfolio manager of Third Avenue Small-Cap Value Fund.  Continue Reading »


  • Third Avenue Management Comments on LSB Industries

    by - Oct 02, 2012
    LSB Industries (LXU) is the unlikely combination of a heating, ventilation and air conditioning (HVAC) business and a nitrogen-based chemical products company. The business mix had been more eclectic until the 1990s, when management focused the company on those businesses in which it had a more compelling market position.

    The HVAC business is a market leader in geothermal and water source heat pumps, which are highly efficient heating and cooling systems. The business is leveraged to commercial, institutional and residential construction, as well as a longer-term trend towards "green" or more energyefficient construction. We think the business is under earning its potential in an economic recovery, something that we are not paying for at present.  Continue Reading »


  • Third Avenue Management Comments on Kennmetal

    by - Oct 02, 2012
    Kennametal (KMT) is a global producer of tools, highly engineered components and advanced materials serving a broad range of industries, including the energy, construction, aerospace, transportation and machine tool industries. Examples of Kennametal's products include radial bearings used in oil and gas drilling operations or grader blades used for road maintenance. These products have to work in environments where thermal shocks, corrosion and other harsh conditions are commonplace. Such demanding conditions require products with wear resistance and long lives on the one hand, but also translate into "consumables" that provide a high degree of recurring revenue for the business.

    Kennametal's operations are highly cash generative and enjoy strong competitive positions. Meanwhile management seems to be focused on the right things, both commercially and as capital allocators: improving the customer value proposition through innovation, balancing organic growth and acquisitions and sharing excess capital with shareholders via buybacks and a growing dividend. Kennametal derives more than half its sales from outside the U.S., however, where economic headwinds of late have stiffened considerably, while some of the company's end markets, such as oil and gas, have softened for industry specific reasons. For investor/speculators hewing to a shortterm timeframe, these may be legitimate concerns. As investors with a long-term time horizon, we are willing to tolerate temporary weakness in a business when the company has compelling longer-term business prospects, an impregnable financial position, a sensibly incentivized and  Continue Reading »


  • Third Avenue Management Comments on Rofin-Sinar

    by Holly LaFon - Oct 02, 2012
    Followers of the Fund will remember that a small position in Rofin-Sinar Common (RSTI) was initiated during the April quarter2. That position became much more meaningful in the July quarter. Additional shares of Rofin-Sinar were purchased as the discount to our estimate of net asset value widened and became more attractive amidst broader macro and near-term earnings concerns. In our April letter, we noted simply that Rofin-Sinar is an "industrial capital equipment company." In plain English, the company makes lasers and parts for lasers – lasers for cutting, lasers for welding, lasers for marking materials and lasers for medical equipment.

    With one of its two headquarters in Germany3, cyclical end markets, more than 40% of sales from Europe and a third from Asia, there is plenty to dislike in the near-term for topdown investors as macro concerns and uncertainty swirl. In a bottom-up analysis, however, there is much more to like for investors with a time horizon beyond a year or two:  Continue Reading »


  • Third Avenue Managements Comments on Applied Materials

    by - Oct 02, 2012
    We also added to our position in Applied Materials Common (AMAT), which was discussed in last quarter's letter. The share price has been weak of late owing to a deteriorating 2012 earnings outlook. Demand for semiconductor capital equipment appears to have been negatively impacted by the slowing global economy. Nevertheless, Applied Materials' financial and market positions remain strong, and the shares were purchased at an attractive price of about nine times 2011 earnings.

    From Third Avenue's third-quarter letter, by Ian Lapey, portfolio manager.  Continue Reading »


  • Third Avenue Management Comments on Nintendo

    by - Oct 02, 2012
    The Fund also initiated a small position in Nintendo Common (NTDOY). Based in Japan, Nintendo is a producer of video game hardware and software. Throughout most of its history, the company has been quite profitable owing to successful products, such as the Wii video game console (hardware) and the Super Mario Brothers and The Legend of Zelda software franchises. However, currently the company is losing money because of fierce competition from traditional competitors (Sony's Playstation and Microsoft's Xbox), as well as new competition from mobile gaming platforms. Despite these significant challenges, Fund Management believes that the company has numerous levers to return to profitability, including the potential success of some of its upcoming products and / or a shift in its operating model to allow its software to be used on competitors' platforms. The shares were purchased at a price that equates to the value of the company's cash and investments, land and 55% ownership stake in the Seattle Mariners, ascribing no value to its tremendous software library and brand name.

    From Third Avenue's third-quarter letter, by Ian Lapey, portfolio manager.  Continue Reading »


  • Third Avenue Management Comments on Symantec Corp.

    by - Oct 02, 2012
    We initiated a position in the common stock of Symantec Corp. (SYMC), a leading provider of security, backup / recovery and storage management software. The company's products are sold to both consumers (through its Norton product line) and corporations. Symantec's end markets seem to be generally healthy and growing, and the software business is very attractive owing to recurring maintenance revenue, high margins (gross margins in excess of 80%) and robust cash flow generation. Symantec has a very strong financial position with $4.1 billion of cash and investments, compared to total debt of $3.0 billion. During the quarter, the company issued $1 billion of long-term debt at very attractive rates (2.75% and 3.9% for five and ten year maturities, respectively). Owing primarily to the weak near term outlook for enterprise IT spending, particularly in Europe, the Fund purchased shares of Symantec Common at only about five times earnings before interest, taxes, depreciation and amortization ("EBITDA"). Transactions in the software industry typically occur at much higher multiples, including, most notably, Intel's purchase of Symantec's competitor, McAfee, in 2011 at about 15 times EBITDA. Subsequent to quarter end, Symantec's CEO was replaced by Chairman Stephen Bennett, who was formerly Intuit's CEO from 2003-2007. The move was in response to the weak stock performance of Symantec Common over the last couple of years and enhances the possibility of some type of resource conversion activity to increase shareholder value.

    From Third Avenue's third-quarter letter, by Ian Lapey, portfolio manager.  Continue Reading »


  • Third Avenue Management Comments on Devon Energy Corp.

    by - Oct 02, 2012
    During the most recent quarter, the Fund exited its small position in Cenovus Common, allocating the capital to Devon Common (DVN), which appears to be much more attractively valued. The Fund initiated its position in Devon Common in January 2012, and the investment has been discussed in each of the last two shareholder letters. Devon's common stock price has been falling recently, owing primarily to weakness in commodity prices. In Devon's recently reported second quarter, oil, natural gas and natural gas liquids prices fell 19%, 54% and 26%, respectively, compared to a year ago. Nevertheless, the company reported a profitable and cash flow positive quarter (including proceeds from the closing of its previously announced joint venture with Sinopec). The company also announced a new $1.4 billion joint venture with Sumitomo Corporation, in which Sumitomo will pay $340 million in cash upon closing and fund 70% of Devon's future capital requirements for a 30% interest in 650,000 acres (no proved reserves) in two oil shale developments in Texas. Devon will continue to operate the properties and retain a 70% ownership interest. The transaction appears to be very attractive for Devon, as Sumitomo is effectively paying up for Devon's expertise by funding most of the capital.

    Despite the pressure from falling commodity prices, Devon continues to have a very strong financial position, with $7 billion of cash compared to $10.6 billion of debt. Net debt totals only 14% of capital and $0.20 per thousand cubic feet equivalent ("mcfe") of proved reserves. Devon added to its hedges during the quarter and now has 65% of its gas production hedged for the rest of the year at $3.76 per mcfe (versus the current price of about $3) and 85% of its oil hedged at $97 (versus the current price of about $90). The valuation seems to be very compelling at about $9 per barrel of oil equivalent ("BOE") of proved reserves. In 2009 and 2010, Devon exited its less attractive Gulf of Mexico and international operations at a price of about $45 per barrel of proved reserves. More recently, Nexen, a Canadian E&P company, agreed to be sold to CNOOC for about $19 per BOE of proved reserves. Although Nexen's reserves are more heavily weighted to oil, Devon's assets carry less development risk as evidenced by its much lower percentage of proved undeveloped ("PUD") reserves (26% versus 53%).  Continue Reading »


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