Third Avenue Management

Third Avenue Management

Last Update: 10-26-2017
Related: Martin Whitman

Number of Stocks: 111
Number of New Stocks: 2

Total Value: $2,219 Mil
Q/Q Turnover: 4%

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

Third Avenue Management Watch

  • Third Avenue Sells Brookdale, Reduces Ralph Lauren, Comerica Holdings

    Martin Whitman (Trades, Portfolio)'s Third Avenue Management (Trades, Portfolio), an investment firm that manages mutual funds, separate accounts and hedge funds, reduced or exited its positions in the following companies in the third quarter:

    The firm's Brookdale Senior Living Inc. (NYSE:BKD) holding was closed, impacting the portfolio by -1.35%.


  • Third Avenue Management Buys Energy Company and REIT in Q3

    Third Avenue Management (Trades, Portfolio) acquired only two stocks in the third quarter, according to its portfolio release Thursday.

    The fund purchased Kimco Realty Corp. (NYSE:KIM), a real estate investment trust, and Tidewater Inc. (NYSE:TDW), an oil and gas company. As long-term investors, the managers at Third Avenue tend to buy few stocks; their top three positions – Weyerhaeuser Co. (NYSE:WY), Brookfield Asset Management (NYSE:BAM) and Lennar Corp. (NYSE:LEN) – have been in the portfolio for longer than six years.


  • Third Avenue Buys Kimco, Tidewater, Adds to Several Other Positions

    Founded by Martin Whitman (Trades, Portfolio), Third Avenue Management (Trades, Portfolio) manages a portfolio of 111 stocks. During the third quarter, the firm bought the following stocks:

    The firm established a 1,080,300-share stake in Kimco Realty Corp. (NYSE:KIM), giving it 0.95%  portfolio space.


  • Mario Cibelli Takes 3 New Positions in 2nd Quarter

    Marathon Partners founder Mario Cibelli (TradesPortfolio) gained three new positions during the second quarter. He established positions in Macerich Co. (NYSE:MAC), HD Supply Holdings Inc. (NASDAQ:HDS) and Molson Coors Brewing Co. (NYSE:TAP).

    Cibelli manages a fairly concentrated portfolio of 33 stocks, which is valued at $218 million. Consumer cyclical stocks represent 41.6% of his holdings.


  • Third Avenue Comments on WesBanco Bank

    WesBanco Bank (NASDAQ:WSBC)

    WesBanco is a mid-sized, community bank with just under $10 billion in assets headquartered in Wheeling, West Virginia. Over the last twenty years, the company made some 25 acquisitions to enter the neighboring states of Ohio and western Pennsylvania. Starting in 2014, the bank hired CEO Todd Clossin, who was the CEO of Midwest and Florida regionsfor Fifth Third Bank, to accelerate the growth. Within a year on board, Clossin made the two largest acquisitions in the company's history: ESB Financial in Pittsburgh in February 2014 (a thrift with $1.9 billion in assets; paid $324MM in cash and stock) and Your Community Bankshares (YCB) in southern Indiana and Kentucky in September 2016 ($1.5 billion in assets; paid $221 MM in cash and stock). These two additions effectively lifted WSBC's asset base by 60%, from $6.0 billion to $9.5 billion today.


  • Third Avenue Comments on PDC Energy

    PDC Energy (NASDAQ:PDCE)

    As touched on earlier in the letter, PDCE is a $2.7 billion independent Exploration and Production company. PDCE has core acreage positions in the Delaware Basin, specifically in Reeves County, Texas and in the Wattenberg Field (Niobrara Shale), in Colorado. Both acreage positions contain prolific high-quality oil and gas rich deposits that have allowed PDCE to grow production levels rapidly (44% growth in 2016) at high return levels. As PDCE ramps up its drilling activities in the Permian Basin, PDCE should be able to continue this growth trajectory, targeting a 25%-40% range over the next several years.


  • Third Avenue Comments on Haynes International

    Haynes International (NASDAQ:HAYN)

    Haynes International Inc. is a $450 million equity market cap manufacturer of nickel and cobalt high temperature (HTA) and corrosion resistant (CRA) alloys. While we have known Haynesfrom a research perspective for over a decade, we finally got the opportunity to purchase a position in the company in the second quarter, as its shares sold off from over $45 per share in January to our entry point of roughly $35. While the stock price decline provided us an opportunity in line with our patient buying approach, we also feel the investment is quite timely given the expected acceleration of the company's aerospace related sales and a likely strong improvement in free cash flow, as it wraps up a major capital expenditure program to increase production levels nearly 50% at its core Kokomo Indiana mill.


  • Third Avenue Comments on Finisar Corp

    Finisar Corporation (NASDAQ:FNSR)

    Finisar is a well-financed provider of optical subsystems and components, which are used in data communications and telecommunications. It was the market share leader in 2016, according to Ovum (market-leading research and consulting firm focused on digital service providers), and has held that honor since 2008. Demand for optical is being driven by additional network bandwidth needs due to increasing data and video traffic. Video downloads and streaming, social networking, on-line gaming, enterprise IP/Internet traffic, cloud computing, and data center virtualization - these are all putting additional demands on the network for increased bandwidth. In response, the telecom industry is ramping up metro (city-level) deployments in North America and Europe; China is increasing itsbuildouts supported by government initiatives to complete broadband coverage in rural and urban areas. On the data communications side, there is an increase in hyperscale data centers (think Amazon Web Services, Microsoft's Azure, Google and the like) and deployments of technology to upgrade existing connections to increase speed and efficiency in the networks.


  • Third Avenue Comments on AMN Healthcare Services

    AMN Healthcare Services (NYSE:AMN)

    Founded in 1985 as a travel nursing company, AMN has become a leading healthcare staffing company that offers temporary placement of healthcare professionalsfor hospitals to fulfill various durations ranging from one day to 2 years. Since 2013, the company spent a total of $360MM on several acquisitions to enter the "solutions" business (outsourced recruiting, permanent staffing, managing personnel, and software scheduling for hospitals) to extend its portfolio. In terms of profit drivers, travelling nurses and allied healthcare workers contribute about 55% of pre-overhead EBITDA, while temporary physicians and the new Solutions segments contribute approximately 20% and 26%, respectively.


  • Third Avenue Small-Cap Value Fund 2nd Quarter 2017 Shareholder Letter

    In the second quarter, the broader market indices of the Russell 2000 Value, the S&P 500, the Nasdaq composite, etc., all continued to trade at or near all-time highs. While clearly we agree that there are pockets of high expectations in the broader market, The Third Avenue Small Cap Value Fund had an active quarter in new purchases, as our robust,repeatable and definable philosophy and idea origination processes led us to uncover and execute new positions. Given this seeming contradiction of a market reaching new highs and our enthusiasm for several new positions, we thought it would be timely to review our stock idea origination philosophy and process.

    Every Third Avenue idea comes from following our core philosophy as originally articulated by Martin Whitman (Trades, Portfolio), that is the three pillars of: i) Creditworthiness, as defined by a strong balance sheet, ii) the ability to compound book value growth and iii) purchasing at a significant discount to our estimated Net Asset Value.


  • Third Avenue Management Comments on Reliance Steel & Aluminum

    New Position: Reliance Steel & Aluminum (NYSE:RS) Founded in the late 1930s, Reliance Steel & Aluminum (Reliance) has grown to become the largest metals service center in North America. Given the name of the company, one could be forgiven for thinking the company produces steel and aluminum. In actuality, as an operator of service centers, Reliance's business is providing essential value-added servicesand distribution for these metals, as well as brass, copper, titanium and other alloys, with more than 100,000 products offered. A few examples of the value-added services Reliance provides are slitting, laser cutting and electropolishing. The company operates a network of more than 300 locations across almost 40 states in the U.S.and a dozen countries.

    Reliance has been on our radar for years during which time we've had the chance to meet with management and tour its operations. After a decline in its stock price this year, we took advantage of the opportunity to initiate an investment with a belief that the company isvery well-positioned to continue its profitable growth, both organically and inorganically. As the domestic and global economy grows over the long term, the need for metal products is ever-increasing, and Reliance has carved out a defendable niche for itself serving this demand. Specifically, Reliance focuses on smaller customers with relatively small orders that need the company's high-quality products quickly (40% of orders are delivered the next day). Taken together, this affords Reliance sticky customer relationships (97% repeat business) with superior margins and pricing, regardless of underlying metal prices. As Reliance's share of its market is still only in the single-digits, the company should continue growing both with the industry and also through ongoing share gains. Reliance has been able to steadily capture market share over its history given the breadth of its productsand services, its buying power and operational efficiency, and the exceptional quality of its products and customer service. Another notable competitive advantage is Reliance's strong balance sheet, with net debt of approximately 30% of capital, 2.2x EBITDA, and strong cash flows for deleveraging. In an industry with a number of poorly capitalized peers, Reliance's financial position has given rise to lasting partnerships with its suppliers and customers and is tied to the quality of its products as it has allowed Reliance the ability tomake industry-leading investments in state-of-the-art equipment.


  • Third Avenue Value Fund's 2nd Quarter Portfolio Commentary

    Does Thematic Investing Have A Place In Value Investing?

    Dear Fellow Shareholders:


  • Third Avenue International Value Fund 1st Quarter Letter

    Matthew Fine, CFA I Lead Portfolio Manager

    Dear Fellow Shareholders:


  • Third Avenue Continues to Buy Amgen, 8 Others

    Third Avenue Management (Trades, Portfolio) was founded by legendary value investor Martin Whitman (Trades, Portfolio). It manages mutual funds, separate accounts and hedge funds. In both fourth-quarter 2016 and first-quarter 2017 the guru bought shares in the following stocks:

    Carrizo Oil & Gas Inc. (CRZO)


  • Third Avenue Management Comments on Avnet

    Avnet (NYSE:AVT) is a leading electronic components distributor. It distributes semiconductors, passive and electromechanical devices and embedded products, acting as an intermediary between components suppliers and end customers. Its services help customers evaluate, design-in and procure electronic components throughout the lifecycle of a customer's product, thereby enabling faster time to market as well as cost efficiencies in both the design and manufacturing processes for its customers. Continued innovation and increasing electronics in all types of industries (industrial, automotive, consumer, etc.) should spur demand for Avnet's services over the longer term.

    What intrigued us about Avnet recently is that the company is in the process of transforming itself to focus on higher value-add and higher margin design and supply chain services. As part of that effort, it sold its lower-margin technology solutions business and acquired a U.K. company, Premier Farnell, to broaden its customer reach and provide it an earlier entrée in the design cycle. Products go through various phases in their life cycle: idea generation to design to production. By getting involved earlier in the design process, Avnet can take a larger role, providing it an opportunity for servicing greater volumes, particularly if and when the product goes into mass production. Avnet received approximately $2.6 billion from the sale of its technology solutions business, of which it plans to use around $1.5 billion to pay down debt. Thus, Avnet's pro forma balance sheet as of year end 2016 was in a net cash position. It also recently increased its share buyback program by $500 million. The Company is cash generative and has opportunities for margin improvement both from revenue and cost synergies related to Premier Farnell as well as other ongoing cost reduction improvements and the completion of an enterprise resource planning (ERP) implementation. We were able to purchase shares of Avnet common stock at an attractive valuation of approximately 1.05x pro forma book value and a discount to estimated NAV.


  • Third Avenue Management Comments on EOG Resources

    We initiated a position in EOG Resources (NYSE:EOG), a $56 billion independent Energy and Production company with a North American focus on oil shale drilling. EOG is a high quality compounder and has industry leading acreage positions in the most prolific, lowest cost and geographically desirable basins--the Permian, the Eagle Ford and the Sanish/Parshall in the Bakken. As a leader in shale drilling, EOG has foreseen the problems facing the industry in fracking sand availability (it owns its own sand company) and take-away and processing (the Company is invested in core areas and is a leader in oil by rail, which today is a call option on tight markets). EOG has low cost acreage as it has grown organically, with the exception of the Yates acquisition in 2016, where it paid "for the best" and accumulated core acreage in the Delaware Permian at a time of distress in the industry. This deal should pay off for EOG as it develops deeper zones, which is in line with our thesis that "big fields get bigger". Additionally, EOG's timing on the deal looks prescient, near the end of recent oil price declines and just ahead of OPEC cutbacks.

    EOG has a highly visible path to continue its strong book value growth. EOG is only allocating drilling capital to wells that produce at least a 30% return at $40 per barrel for oil, where it has 10+ years of drilling inventory, a figure that is likely to grow with further delineation of its acreage and continued drilling efficiencies. While every E&P company will be subject to oil price volatility, we feel EOG is best positioned to add value in the strong times and survive the lean times as it has a strong balance sheet and industry leading returns.


  • Third Avenue Management Comments on Bank of New York Mellon

    Our investment premise for Bank of New York Mellon (NYSE:BK) is that it is a strong book value compounder that is substantially "under-earning" its profitability potential. The Company has undertaken significant cost savings initiatives, which combined with market-leading digital platform investments, should drive future growth and market share gains. The Company's balance sheet is strong with significant excess capital enabling a sizable return of capital to shareholders through both dividend and share buybacks. Lastly, with activist interest still high, any loss of momentum could lead to renewed calls for a break-up of the company to accelerate closure of the discount to NAV.

    BK's book value and tangible book value growth both inflected positively in 2016 over its three-year trailing averages, over and above strong buyback and dividend activity, and we see this growth as set to accelerate with stronger earnings. Earnings Per Share (EPS) growth finally reaccelerated in 2015 and 2016, to $2.85 and $3.17, respectively, after languishing in the low-$2 per share range from 2011 to 2014. Management, spurred by activist pressure and new board members in 2014, has accelerated its cost reduction efforts and has committed to positive operating leverage regardless of the revenue growth environment. The results of this focus are clearly seen in 4Q 2016 earnings where non-interest expenses fell 2.1% while revenues grew 1.7%, generating 351 basis points of positive operating leverage. This cost-cutting focus is a key tenant of our investment case and an underlying pillar of why we believe BK shares can outperform regardless of the broader market environment. Further, while this cost reduction focus was started in 2014 when falling interest rates and meager corporate activity were suppressing revenues, we think the current tailwinds of higher interest rates and better corporate activity should also accelerate revenue growth, providing even stronger earnings leverage over the next few years that could push 2018 EPS to the $4.00 per share level.


  • Brookdale Worth More on Sale

    Brookdale (NYSE:BKD) is the country’s largest operator of facilities for senior citizens. The company has faced quite a few problems over the years and has not been profitable. The stock does not pay a dividend and has copious amounts of debt. The plus is that the real estate is probably worth more, and the company could get sold.

    The company has 185.65 million shares, the stock trades for $12.85, and the market cap is $2.385 billion. Diluted earnings per share are a loss of $2.18. The stock has not paid a dividend since 2008.


  • Third Avenue Management's Top 5 Stock Buys of Q4

    The firm founded by legendary investor Martin Whitman (Trades, Portfolio), Third Avenue Management (Trades, Portfolio), selected eight new stocks and its flagship value fund beat the market in the fourth quarter.

    The Third Avenue Value Fund returned 4.72% in the fourth quarter, outperforming the 3.83% rise in the S&P 500 index. For the year, it returned 13.39%, also surpassing the 11.96% rise in the index. Leading its gains was the advance of its parcel of banks that it has accumulated over the past several years. As managers who focus on buying stocks low and holding for the long term, almost all of the financials they picked have risen substantially in price, and they see more appreciation to come.  

  • These 5 Funds Let Your Money Travel the World

    It’s a big world out there. We hear a lot of talk about the “global economy,” but the truth is much more complicated. It’s more accurate to say that the world is built on a collection of national and regional economies, each with its own unique attributes and near-term outlooks.

    Unfortunately, American investors all too often ignore the rest of the world or pay attention to what’s happening overseas only insofar as it affects their U.S.-based securities holdings. In doing so, they miss exciting growth opportunities and limit their portfolios’ diversification potential both of which are ever more critical in an increasingly complex and uncertain economic environment.


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