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Third Avenue Value Fund Purchases Stake in Johnson Controls

Company has increased its dividends per share by 11.20% over the last 10 years

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Kyle Ferguson
Jun 30, 2016
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Third Avenue Value Fund purchased a 325,700-share stake in Johnson Controls Inc. (

JCI, Financial) on April 30.

Milwaukee-based Johnson Controls is a global technology and industrial leader serving customers in more than 150 countries. The company invented the first electric room thermostat in 1885; since then it has been using the principles of delivering innovative products that help the world run in an efficient, rational and safe manner. The company creates products, services and solutions to increase energy efficiency and lower operating costs for buildings worldwide. The company also creates batteries and energy storage — including advanced batteries for hybrid and electric vehicles as well as stationary energy storage.

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Johnson Controls has a market cap of $28.59 billion, a P/E ratio of 65.83, an enterprise value of $36.16 billion and a P/B ratio of 2.85.

Robert “Chip” Rewey, portfolio manager of Third Avenue Trust - Third Avenue Value Fund, may have decided to purchase a stake in Johnson Controls for the following reasons:

  • The company has increased its dividends per share growth rate by 14.60% over the previous 12 months. During the previous three years, the average dividends per share growth rate was 13% per year. During the past five years, the average dividends per share growth rate was 13.60% per year, and over the previous decade, the average dividends per share growth rate was 11.20% per year.

Below is a chart for Johnson Controls' dividends per share growth rate.

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  • Johnson Controls and the Sacramento Kings have signed an agreement that will integrate the building automation systems, as well as fire and life safety systems, to create an all-encompassing impact on Golden 1 Center – the future home of the Sacramento Kings. This gives the company further marketing opportunities and exposure, which are good signs.
  • Johnson Controls recently won the Governor’s New Product Award for its distributed energy storage offerings. The company took first place in the mega company category, which includes firms with 10,000 or more employees.
  • Johnson Controls, the world's largest manufacturer of Absorbent Glass Matt (AGM) batteries, recently announced it is investing $245 million between 2016 and 2020 to double AGM production capacity in North America.
  • Johnson Controls has been able to increase its gross profits by 7% annually over the previous 10 years.
  • Johnson Controls is an established company with 131 years of experience in its industry.

In conclusion

Johnson Controls has 131 years of experience in its industry. It recently signed a deal with the Sacramento Kings that will give the company further exposure and marketing opportunities. The company won The Governor’s New Product Award for its distributed energy storage offerings. Johnson Controls has also increased its dividends per share by 11.20% over the previous decade, and it has been consistently increasing its profits by 7% annually over the previous 10 years.

All of these may have encouraged Third Avenue Value Fund to purchase a stake in Johnson Controls.

Martin Whitman (Trades, Portfolio) originally founded Third Avenue Value Fund in 1990 which he ran for 22 years before handing off his duties to Rewey. Rewey had the privilege of learning from Whitman, and he attributes his investment style to the knowledge and wisdom he gained from Whitman's investment philosophy of maintaining a concentrated portfolio that focuses on a company's financial strength to ensure the company can weather the storm in times of adversity.

From 1991 to 2015, Third Avenue Value Fund returned 5.3% for investors.

Cheers to your investment success.

Disclosure: Author does not currently own any shares of Johnson Controls.

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