|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
Marty Whitman's Third Avenue Management Buys Apache Corp
Posted by: Holly LaFon (IP Logged)
Date: July 2, 2013 03:30PM
Marty Whitman founded Third Avenue Management in 1986 and remains its chairman and portfolio manager. His firm’s philosophy centers around finding undervalued companies with a strong balance sheet and low book value (closely related to net asset value). They are less concerned with attempting to predict a company’s revenue and earnings potential in the future.
Several days after releasing his semi-annual manager letter, Whitman’s Third Avenue Management announced their second quarter portfolio update. The only new stock included was Apache Corporation (APA).
Apache Corporation (APA)
Apache Corp. is an oil and gas exploration and production company operating in the U.S., Canada, the UK North Sea, Egypt, Australia and Argentina. It has a $32.09 billion market cap.
Third Avenue purchased 750,000 shares of the company for $79.50 on average, amounting to a 2.4% portfolio weight and 0.19% of Apache’s shares outstanding.
Financially, Apache has achieved growing revenue annually since 2008 and experienced one year of losses in the same period:
In the first quarter of 2013, earnings were down to $698 million from the previous year’s $806 million, while barrels of oil equivalent production increased as North American onshore liquid hydrocarbons increased 45%.
Simultaneous with earnings, Apache said it plans to divest $4 billion in assets by the end of calendar year 2013 and use $2 billion of the proceeds to reduce debt, repurchase 30 million shares and boost its finances. In the past three years, the company has made more than $16 billion of acquisitions.
Apache has $248 million in cash and outstanding debt of $12.5 billion.
True to Third Avenue’s concern with book value, Apache in the first quarter traded near its lowest P/B ratio since 1999. See its historical range:
When they purchased, the stock was also approaching fair value according to the Peter Lynch chart:
Whitman commented on the new position in Apache in his semi-annual 2013 letter:
“The Fund initiated a new position in Apache Common (APA) during the quarter. Apache is a Houston based oil and gas exploration and production ("E&P") company. Apache Common seems to be very inexpensive—the shares were purchased at a slight discount to book value, 3.5x earnings before interest, taxes depreciation and amortization ("EBITDA"), 8x expected 2013 earnings and a 20% discount to our conservative estimate of net asset value ("NAV"). The management team, led by CEO Steve Farris, has an impressive long-term track record of growth, and several recent acquisitions, including assets opportunistically acquired from BP after the Macondo oil spill, provide the company with a wealth of development opportunities to drive future net asset value growth. Apache's financial position is strong as most of its debt is long term, low coupon (A-credit rating) and easily supported by cash flow (interest coverage totals about 24x).”
Whitman holds several other oil and gas companies in his portfolio, including Encana Corp. (TSX:ECA) and Devon Energy Corp. (DVN).
See Marty Whitman’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Martin Whitman.
If you are not a Premium Member, why not Take a 7-Day Free Trial?
Guru Discussed: Marty Whitman: Current Portfolio, Stock Picks
Stocks Discussed: APA, TSX:ECA, DVN,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.