Profile:
Martin Whitman is Founder and Portfolio Manager of the Third Avenue Value Fund (TAVFX). From inception in November 1990 through October 2007, his fund has returned an annualized average of 16.83%. In the same period, the S&P 500 index returned an average 12.33% annually.
Investing Philosophy:
Whitman is a "buy and hold" value investor. He buys stock in companies when he thinks that the company has strong finances, competent management, and the business is understandable. Also the company's stock must be cheap, meaning it trades at a significant discount to intrinsic value. The market price must lie substantially below a conservative valuation of the business as a private entity, or as a takeover candidate. He generally sells an investment only when there has been a fundamental change in the business or capital structure of the company that significantly affects the investment's inherent value, or when he believes that the market value of an investment is overpriced relative to its intrinsic value.
A Value Approach to Investing
Since the founding in 1986, Third Avenue Management has utilized a disciplined fundamental, bottom-up approach to identify appropriate investments with the sole objective of delivering superior returns with limited investment risk, over the long term.
Martin Whitman is guided by one proven value philosophy, which focuses on the strength of a company's balance sheet and the discounted price of its securities. The belief is that a strong, well-managed company can survive difficult environments, and the price of its securities will eventually reflect its true intrinsic value.
Third Avenue Management's research approach is opportunistic and not constrained by market capitalization, industry sector, or geographic location.
What He Looks For
One proven value philosophy guides each of the investments. He seeks to invest in safe companies that are cheaply priced. Key criteria are as follows:
Safe Companies
- Strong finances
- Competent management
- Understandable business
- Significant discount to intrinsic value
Martin Whitman analyzes companies from the bottom up, reviewing all public documents, speaking with outside experts and contacts, identifying value and risk drivers and interviewing management before making an investment decision.
He analyzes the quality and quantity of resources existing in a business, rather than its projected future revenues and earnings. He thinks that the current balance sheet is the best, albeit not the only, measure of a company's value. Predictions based on future operating earnings do not capture the possible impact of corporate events such as mergers and acquisitions, changes of control, management buyouts, share repurchases, refinancing, reorganizations, asset sales, spin-offs, investments in new ventures and corporate liquidations.
His stringent research gives him conviction in his best ideas, allowing him to establish concentrated positions.
He invests only in companies that he believes to have the potential to create value for his clients over the long term, withstanding cyclical downturns and evolving as leaders among their competition. His long-term focus is to minimize portfolio turnover and enhances the tax efficiency of his funds and private portfolios.
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