Martin Whitman (Trades, Portfolio) of Third Avenue Value Fund is a contrarian investor who looks to invest in "safe companies that are cheaply priced."
The business has to be easy to understand, have strong management, strong finances and strong a strong legal framework. The stock also has to be significantly discounted in relation to its intrinsic value while also having potential for attractive growth.
Here's a look at Whitman's top growth stocks:
Wheelock and Co Ltd (HKSE:00020, Financial)
2.8% of Whitman's portfolio consists of HKSE:00020. Whitman currently owns 9,428,000 shares, valued at $53,342,000.
Wheelock and Co is an investment holding company that operates through five segments: investment property, development property, hotels, logistics and communications, media and entertainment.
When looking at the company's growth rate over a ten-year span, the company meets Whitman's criteria for having attractive growth. As of June 2014, Wheelock's EBITDA per share for the trailing twelve months was $19.54. The average growth rate over the past ten years was 60.70%.
Revenue per share for the trailing twelve months was HK$17.26. Revenue growth over the past ten years was 24.50%, although revenue growth has begun to slow down over the past year. The current P/S ratio is 2.14.
According to the DCF calculator, which is a premium feature for members, Wheelock's fair value is at HK$193.30, with an 81% margin of safety. The company's business predictability rating is a 2.5 out of 5 stars. Wheelock is currently trading at HK$36.95 a share. The stock's price meets Whitman's criteria for price, as it is deeply discounted in relation to its intrinsic value.
Valmont Industries Inc (VMI, Financial)
Whitman currently owns 165,180 shares of VMI, valued at $19,841,000. The stock is 1.1% of his overall portfolio.
Valmont Industries produces fabricated metal products, as well as steel and aluminum pole, tower and other structures. The company was founded in 1946 and became public in 1968.
Valmont has the second highest 10-year EBITDA growth rate in Whitman's portfolio at 16.60%. As of December 2014, the company's EBITDA per share for the trailing twelve months was $15.75.
Like Wheelock, Valmont's revenue growth has slowed down over the past twelve months but has maintained an average growth rate of 12.60% over the past decade. Revenue per share for the trailing twelve months was $120.53 a share. The P/S ratio of 1.03 is close to the three-year low of 0.98, which is a good sign.
VMT has a fair value of $200.42 with a 38% margin of safety and a business predictability rating of 4.5 stars. Since the stock is currently trading at $123.64 a share, it meets Whitman's criteria for being deeply discounted in relation to the stock's intrinsic value.
Brookfield Asset Management Inc (TSX:BAM.A, Financial)
2.4% of Whitman's portfolio consists of BAM.A shares. Whitman currently owns 896,204 shares, valued at $45,689,000.
Canadian-based Brookfield was formed in 1997. It is a global asset management company that organizes its businesses into numerous operating platforms that manage over $175 billion in assets.
Brookfield has the third-highest EBITDA 10-year growth rate in Whitman's portfolio at 14.20%. The company's EBITDA per share as of September 2014 for the trailing twelve months was C$16.09.
Brookfield's revenue has also been declining over the past year, although the company has maintained an average growth rate of 17.70% over the past ten years. Revenue per share for the trailing twelve months was C$34.10. Investors should be cautious of the P/S ratio of 2.01 because it is close to the five-year high of 2.02.
According to the DCF calculator, BAM.A has a fair value of C$69.92 with a 2% margin of safety. The stock is currently trading at $68.54 and has a business predictability rating of 2.5 stars out of 5. Although the stock is not deeply discounted, it is still trading at lower than its intrinsic value.
"I'm price conscious. I have this easy way of measuring price, quantity and quality. Everything is in the balance sheet –Â the only way you know whether you've covered all the bases is to look at the balance sheet," says Whitman.
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