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Martin Whitman’s Third Avenue Value Fund’s Top Five Year-End Stocks

Monica Wolfe

Monica Wolfe

119 followers

Martin Whitman, the chairman of the board at Third Avenue Asset Management, made a relatively early release of his fund’s third quarter portfolio this week. While Whitman no longer manages the funds at Third Avenue, he continues to write the shareholder letter each quarter. Third Avenue focuses on valuing its stocks from the bottom up, focusing on the “creditworthiness,” the ability for the “issuer to grow net asset value (NAV)” and the stock’s price in relation to its NAV.

Over the duration of the fourth quarter the portfolio managers at Third Avenue bought two new stocks bringing the fund’s total to 37 stocks valued at $2.3 billion.

The following five companies represent the stocks that Third Avenue holds the largest stake in:

Wheelock and Co. (HKSE:00020)

Third Avenue’s largest holding is in the Hong Kong-based Wheelock and Co. The fund holds on to 29,148,000 shares of the company’s stock. Their position in Wheelock represents 1.43% of the company’s shares outstanding and 6.5% of the fund’s total portfolio.

During the third quarter Whitman cut his position -4.49% by selling a total of 1,370,500 shares. He sold these shares in the fourth quarter price range of HK35.05 to HK41.15. Since this sell, the price per share has increased a slight 0.77%.

Third Avenue’s holding history as of the third quarter:

Wheelock is an investment holding company. It operates through four segments: property investment, property development logistics and communications, and media and entertainment (CME). The company is headquartered in Hong Kong and is also traded in America and Germany.

Wheelock and Co.’s historical revenue and net income:

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The analysis on Wheelock and Co. reports that the revenue has been in decline over the past year, the price is nearing a 10-year high and the dividend yield is at a five-year high.

The Peter Lynch Chart suggests that the company is currently undervalued:

1389020380784.png

Wheelock and Co. has a market cap of HK72.44 billion. Its shares are currently trading at around HK 35.70 with a P/E ratio of 2.70, a P/S ratio of 2.35 and a P/B ratio of 0.30. The company had an annual average earnings growth of 41.2% over the past 10 years.

GuruFocus rated Wheelock the business predictability rank of 2-star.

POSCO (PKX)

Third Avenue Asset Management also holds a 6.1% stake in POSCO. The guru fund owns a total of 1,881,774 shares of POSCO, representing 0.61% of the company’s shares outstanding.

Over the fourth quarter Whitman’s fund cut their holdings a slight -1.83% by selling a total of 35,000 shares. He sold these shares in the price range of $72.19 and $80.40 per share.  Prior to this sell the guru had not made any moves in the company since the first quarter of 2013.

Third Avenue’s holding history as of the fourth quarter:

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POSCO is engaged in the manufacturing and distribution of steel rolled products and plates in the domestic and overseas markets. It manufactures and sells a line of steel products such as plates, wire rods, hot and cold rolled products and stainless steel products.

POSCO’s historical revenue and net income:

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The analysis on POSCO reports that the company has a poor buyback record that it has issued KRW10.7 billion of debt over the past three years and its price has been in decline over the past year.

The Peter Lynch Chart suggests that the company is currently overvalued:

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POSCO has a market cap of $24.88 billion.  Its shares are trading at around $78.00 with a P/E ratio of 16.00, a P/S ratio of 0.40 and a P/B ratio of 0.60.  The company had an annual average earnings growth of 10.80% over the past ten years.

GuruFocus rated the company the business predictability rank of 5-star.

Toyota Industries Corp. (TSE:6201)

Another one of Third Avenue’s largest holdings is in Toyota Industries where the fund holds on to 3,084,800 shares of the company’s stock.  The fund’s position in the company makes up for 5.9% of their total portfolio and 0.61% of the company’s shares outstanding.

The fund did not alter their position in Toyota over the duration of the fourth quarter. Since their sell in the third quarter the price per share is up about 11.5%.

Third Avenue’s historical holding history:

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Japan-based Toyota Industries manufactures and sells textile machinery, automobiles and materials handling equipment, and engages in the logistics business.

Toyota Industries’ historical revenue and net income:

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The analysis on Toyota reports that the company’s price is near a 5-year high, its dividend yield is at a 1-year high and its Piotroski F-Score is high, indicating a healthy situation. It also notes that the company’s P/E and P/B ratios are trading at 1-year lows.

The Peter Lynch Chart suggests that the company is currently overvalued:

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Toyota Industries has a market cap of ¥1481.43 billion; its shares trade with a P/E ratio of 19.8, P/B ratio near a one-year low at 0.46 and P/S ratio near a two-year high at 0.81. The dividend yield of Toyota Industries stock is 1.04%. Toyota Industries had an annual average earnings growth of 12.50% over the past five years.

Henderson Land Development (HKSE:00012)

The fund’s fourth largest holding is in Henderson Land Development where they hold on to 21,921,322 shares of the company’s stock.  Their position in the company makes up for 5.7% of their portfolio and 0.83% of the company’s shares outstanding.

The fund did not alter their position in the company over the fourth quarter, but since their last transaction in the third quarter the price per share has dropped an additional -7.9%. 

Third Avenue’s historical holding history:

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Henderson is an investment holding and the business activities of its subsidiaries are property development and investment, construction, infrastructure, hotel operation and management, department store operation and management, finance and property management. It also operates department stores, hotels and infrastructure business.

Henderson Land Development’s historical revenue and net income:

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The analysis reports that the company’s revenue has been in decline over the past three years, they have issued HKD599.5 million of debt over the past year and its operating margin has been in decline over the past 5-years.

The Peter Lynch Chart suggests that the company is currently undervalued:

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Henderson Land Development has a market cap of ¥118.35 billion.  Its shares were trading at around ¥44.05 with a P/E ratio of 5.80, a P/S ratio of 6.94 and a P/B ratio of 0.56.  The dividend yield of Henderson’s stocks is currently at 2.38%.  The company had an annual average earnings growth of 0.40% over the past five years.

Bank of New York Mellon (BK)

Third Avenue’s fifth largest position is in Bank of New York Mellon Corp. The guru holds on to a total of 4,114,350 shares, representing 0.36% of the company’s shares outstanding and 5.6% of his total portfolio.

During the third quarter the fund reduced its position 15.83% by selling a total of 773,529 shares of the company’s stock. They sold these shares at an estimated average quarterly price of $30.69. Since then the price per share has dropped about 0.6%.

Third Avenue’s holding history as of the third quarter:

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The company is a global financial services company. Bank of New York Mellon provides a comprehensive array of services that enable institutions and individuals to manage and service their financial assets in more than 100 markets worldwide.

Bank of New York Mellon’s historical revenue and net income:

1388705336712.png

The analysis on BK reports that the company’s dividend yield is at a two-year low, its price is nearing a three-year high, they have issued $3.2 billion of debt over the past three years and the company’s interest coverage is comfortable.

The Peter Lynch Chart suggests that the company is currently overvalued:

1388705389972.png

Bank of New York Mellon Corp has a market cap of $39.65 billion. Its shares are currently trading at around $34.52 with a P/E ratio of 18.80, a P/S ratio of 2.70 and a P/B ratio of 2.40. The company holds a dividend yield of 1.70% and has had an annual average earnings growth of 6.40% over the past five years.  

You can check out Third Avenue’s complete fourth quarter portfolio here.

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