Martin Whitman

Martin Whitman

Last Update: 09-28-2017
Related: Third Avenue Management

Number of Stocks: 35
Number of New Stocks: 1

Total Value: $1,055 Mil
Q/Q Turnover: 4%

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

Martin Whitman Watch

  • 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. (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.


  • Third Avenue Management Comments on Insight Enterprises

    Insight Enterprises (NASDAQ:NSIT) is a value added reseller and servicer of hardware and software. The company assists large corporations, and state and federal governments on Information Technology issues such as designs and implementation of networking, data storage practices, disaster recovery, and hardware and software technologies. It distributes products from large vendors such as Cisco, Dell, Hewlett Packard, Apple and Microsoft, selling everything from tablets to network servers to software licensing.

    While distribution is a thin margin business, transactions are not based solely on price. The “value-added” characteristic requires the gaining of confidence from technology vendors to be an approved seller as well as from the IT professionals at the clients to be on the first-call basis. This relationship erects barriers to entry and creates recurring sales.


  • Third Avenue Management Comments on Multi-Color Corp

    During the quarter we increased our investment in Multi-Color Corporation (NASDAQ:LABL), a leading label company, after a significant decline in share prices following quarterly results short of Street estimates. While we are attracted to the unusual stability of Multi-Color's business, we were encouraged by management's proactive decision to exit a modest amount of low-margin business during the quarter and continue to view the company as a very high-quality compounder at an attractive valuation. With a very fragmented label industry around the world and Multi-Color's strong cash flows and stellar management team, the company remains very well-positioned to continue growing organically and inorganically across the globe.


  • Third Avenue Management Comments on Visteon

    During the quarter, as part of its capital return program related to the sale of its stake in its climate control business last year, Visteon (NYSE:VC) made a $1.75 billion special cash distribution to shareholders ($43.40 per share). The Board also authorized a $500 million share repurchase program, which is in addition to the $500 million repurchased last year. Post these actions, the company is still well-financed, with net cash on its balance sheet. We used some of the proceeds we received from the distribution to increase our position in Visteon common as the shares continued to trade at a material discount to our estimated NAV. Since focusing on being a standalone automotive electronics company, centered on cockpit electronics, Visteon has been successful in re-winning and winning new business, reducing costs and showing margin improvement. We believe Visteon is well-positioned to participate in the growing connected car market.


  • Third Avenue Management Comments on SemGroup Corp

    Shares of SemGroup Corp. (NYSE:SEMG) declined as investors sold down the Master Limited Partner (MLP) group aggressively. SemGroup is a midstream transportation company that owns the General Partner stake in MLP Rose Rock Partners. Specific worries regarding SemGroup stem from its midstream exposure to independent E&P companies who may cut production or seek pipeline rate reductions. Also, investors worried about the potential competition for SemGroup’s White Cliffs pipeline serving the Denver-Julesburg basin. While there is potential for production softness and rate pressure if oil prices remain at current low levels, we feel the market is overlooking the power of SemGroup’s in place assets.

    The midstream fractionation assets will be required for any E&P production and thus will have solid negotiating power, and similarly, the White Cliffs pipeline has excess capacity that can be marketed to be competitive with new entrants and thus serve as a deterrent to irresponsible capital expansion by peers.


  • Third Avenue Management Comments on Anixter

    Anixter (NYSE:AXE) is a value-added distributor of data cables, security products, as well as low-voltage and high voltage electrical wires. It sells some 500,000 different SKUs sourced from thousands of manufacturers. Manufacturers rely on Anixter to reach target customers and the customers depend on Anixter to evaluate and test appropriate products for their particular needs. In a very general sense, Anixter’s business model is similar to that of a broker, earning a relatively stable gross margin, without assuming inventory or obsolescence risks. Since most product costs are passed through, gross profit serves as a revenue base to cover the operational expenses such as the company’s 230 warehouses and some 3,000 person salesforce.

    Over the last few months, investors sold off AXE shares due to weaker economic conditions. Spending on nonresidential construction, oil and gas, and general capital expenditures all have slowed down. The stronger US dollar also weakens foreign sales as well as causing negative financial translation. We see these pressures as transitory and likely abating over 2016. Moreover, we see a long-term visible path to cost reduction and deleveraging spurred by acquisition integration and internal cost controls, which should leverage the benefit of recovering revenue growth.


  • Third Avenue Management Comments on Interfor Corp

    Shares of Vancouver, Canada based Interfor Corporation (IFP), which harvests timber and markets lumber products for North American residential and commercial construction markets, was the top detractor of performance for the quarter. Despite its Canadian headquarters, over 64% of Interfor’s lumber board feet are sourced in the US. Moreover, a full two-thirds of this is from the US South, where Interfor has spent $400 million since 2013 to build a clustered presence.

    Shares sold off as log prices softened into 3Q15 earnings due to weaker than expected US housing starts and fears of weaker log exports to China, although these account for a small portion of Interfor sales. We believe the outlook for Interfor remains strong based on i) accelerating US housing starts, ii) stronger free cash flow in 2016 which will be applied to deleveraging now that the Castlegar new build facility is complete, and iii) a $50 million profit improvement target over 2015 and 2016 including $10 million in Castlegar income, $35 million in US South restructuring savings and $5 million corporate wide best practice savings.


  • Third Avenue Management Comments on CSGS

    CSGS (NASDAQ:CSGS) is a premier provider of customer support functions for the cable industry. It manages a full suite of customer service functions, starting from initial activation of accounts to service changes to bill presentment and collection, and receivables management. Through its platform, the company extends its capabilities to adjacent markets such as telecommunication and media and international. As entertainment and communication converge and distribution thus becomes more disintermediated due to digitalization, media distributors are outsourcing more of their customer management, billing and collection to specialists such as CSGS. Based on its existing large investment in software and personnel training, CSGS can process complex, high volume transactions and at the same time provide the human support that enhances customer experience that is so crucial in brand building. Its three largest customers, Comcast, DISH and Time Warner, account for 24%, 14% and 12%, respectively, of total revenue.


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