It is common for investors to read the latest shareholder letters from investment gurus to understand their latest positions and opinions. However, it is often that the real wit and wisdom of the investment gurus are found in old classic shareholder letters.This is one of many in a series of articles where I will extract relevant portions of classic guru shareholder letters and share with readers my views.
Here is the October 1992 shareholder letter of the Third Avenue Fund Inc. by Martin Whitman.
Extracts:
(1) "...most analysts in research departments appear to be interest in current earnings and short-term earnings forecasts. TAVF is interested in long-term basic earnings power...TAVF pays no attention to macro factors...It's difficult to spend a lot of time learning the 'nitty-gritty' facts about an issuer and its securities; on the other hand, it's easy to have opinions about things like the outlook for the overall economy..."
(2) "...TAVF goes to great lengths to try to avoid investment risk, i.e., even using worst case scenarios the underlying values attributable to the securities in which TAVF invests ought to be greater than the Fund's cost basis after allowing for a considerable dissipation of future values as events unfold..."
(3) "...TAVF differs from many other very fine and capable value investors in that if I think a value is good enough without reference to other factors, the Fund will buy. In contrast, others want not only value , but also a catalyst, i.e., evidence that something is going to happen within a determined period of time..."
Comments:
(1) Being a focused long-term bottom-up value investor is not easy, you have to ignore the daily media and sell-side analysts who are excessively short term and top down.
(2) Worst case scenario analysis has proven to be a very effective investing tool for me. If a stock's valuation embeds assumptions reflecting the worst case scenario, the stock is trading at very attractive valuations.
(3) "...So, if you wait for the robins, spring will be over:" Warren Buffet quote. Most value investors usually miss the boat waiting for a catalyst. Share prices move on expectations, not events.
You can read Third Avenue Shareholder letters (1998 to now) here.
Shareholder letters from 1990 to 1998 have to be requested from Third Avenue. I got a bound hardcopy of excerpts from letters to Third Avenue Fund Shareholders (1990 to 2005) from them.
Here is the October 1992 shareholder letter of the Third Avenue Fund Inc. by Martin Whitman.
Extracts:
(1) "...most analysts in research departments appear to be interest in current earnings and short-term earnings forecasts. TAVF is interested in long-term basic earnings power...TAVF pays no attention to macro factors...It's difficult to spend a lot of time learning the 'nitty-gritty' facts about an issuer and its securities; on the other hand, it's easy to have opinions about things like the outlook for the overall economy..."
(2) "...TAVF goes to great lengths to try to avoid investment risk, i.e., even using worst case scenarios the underlying values attributable to the securities in which TAVF invests ought to be greater than the Fund's cost basis after allowing for a considerable dissipation of future values as events unfold..."
(3) "...TAVF differs from many other very fine and capable value investors in that if I think a value is good enough without reference to other factors, the Fund will buy. In contrast, others want not only value , but also a catalyst, i.e., evidence that something is going to happen within a determined period of time..."
Comments:
(1) Being a focused long-term bottom-up value investor is not easy, you have to ignore the daily media and sell-side analysts who are excessively short term and top down.
(2) Worst case scenario analysis has proven to be a very effective investing tool for me. If a stock's valuation embeds assumptions reflecting the worst case scenario, the stock is trading at very attractive valuations.
(3) "...So, if you wait for the robins, spring will be over:" Warren Buffet quote. Most value investors usually miss the boat waiting for a catalyst. Share prices move on expectations, not events.
You can read Third Avenue Shareholder letters (1998 to now) here.
Shareholder letters from 1990 to 1998 have to be requested from Third Avenue. I got a bound hardcopy of excerpts from letters to Third Avenue Fund Shareholders (1990 to 2005) from them.
