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 the first in a series of articles where I will extract relevant portions of classic Guru shareholder letters and share with readers my views.
I present to you the first shareholder letter of the Third Avenue Fund Inc. by Martin Whitman in October 1990.
Excerpts:
(1) "...Management believes that most of the securities owned by TAF are selling at prices that appear to reflect panic on the part of sellers...Low prices ought to reflect both reduced risk and large appreciation potentials for TAF..."
(2) "...A brief review of the rationale for each of TAF's holdings...acquired its position at less than two times earnings at above a 57% discount from net asset value...acquired at less than five times earnings and at 57% discount from net asset value...debt-free companies...at prices which appear to be discounts of at least 50% from conservatively estimated present values..."
(3) "...Certainly all conventional thinkers believe TAF is speculative...But given the prices at which the various securities were acquired, and given the extensive, in-depth research that went into the decision making process for each investment, speculative vs versus conservative ought not to be measured only what is cosmetically acceptable..."
Comments:
(1) Be Greedy When Others Are Fearful. Panic selling offers real investment opportunities for value investors who are firmly focused on fundamentals instead of price movements and prevailing sentiment.
Watch the downside, and the upside will take care of itself. Price is relative to the safety and quality characteristics of the investment.
(2) Third Avenue's investment rationale on a quantitative basis reflects the golden rule of paying 50 cents for a dollar.
(3) The words "cosmetically acceptable" strike a chord with me. It never fails to amazes me how people judge an investor's choice of stocks without even asking about the entry price and the investment basis.
Picture this scenario at a value investors gathering:
A: What stocks do you have in your portfolio?
B: XYZ.
A: You mean you bought this trash? Are you a value investor?
B: XYZ was a five bagger for me. I bought XYZ at historical lows after in-depth research assessing the downside risks and appreciation potential for the stock.
A: (Muted silence)
You can read Third Avenue Shareholder Letters (1998-now) here.
Shareholder letters from 1990 to 1998 have to be requested from Third Avenue.
I got a bound hard copy of excerpts from letters to Third Avenue Fund shareholders (1990-2005) from them.Also check out:
This is the first in a series of articles where I will extract relevant portions of classic Guru shareholder letters and share with readers my views.
I present to you the first shareholder letter of the Third Avenue Fund Inc. by Martin Whitman in October 1990.
Excerpts:
(1) "...Management believes that most of the securities owned by TAF are selling at prices that appear to reflect panic on the part of sellers...Low prices ought to reflect both reduced risk and large appreciation potentials for TAF..."
(2) "...A brief review of the rationale for each of TAF's holdings...acquired its position at less than two times earnings at above a 57% discount from net asset value...acquired at less than five times earnings and at 57% discount from net asset value...debt-free companies...at prices which appear to be discounts of at least 50% from conservatively estimated present values..."
(3) "...Certainly all conventional thinkers believe TAF is speculative...But given the prices at which the various securities were acquired, and given the extensive, in-depth research that went into the decision making process for each investment, speculative vs versus conservative ought not to be measured only what is cosmetically acceptable..."
Comments:
(1) Be Greedy When Others Are Fearful. Panic selling offers real investment opportunities for value investors who are firmly focused on fundamentals instead of price movements and prevailing sentiment.
Watch the downside, and the upside will take care of itself. Price is relative to the safety and quality characteristics of the investment.
(2) Third Avenue's investment rationale on a quantitative basis reflects the golden rule of paying 50 cents for a dollar.
(3) The words "cosmetically acceptable" strike a chord with me. It never fails to amazes me how people judge an investor's choice of stocks without even asking about the entry price and the investment basis.
Picture this scenario at a value investors gathering:
A: What stocks do you have in your portfolio?
B: XYZ.
A: You mean you bought this trash? Are you a value investor?
B: XYZ was a five bagger for me. I bought XYZ at historical lows after in-depth research assessing the downside risks and appreciation potential for the stock.
A: (Muted silence)
You can read Third Avenue Shareholder Letters (1998-now) here.
Shareholder letters from 1990 to 1998 have to be requested from Third Avenue.
I got a bound hard copy of excerpts from letters to Third Avenue Fund shareholders (1990-2005) from them.Also check out:
