Value-Focused Third Avenue Makes Picks for Double-Digit Returns

Marty Whitman, the legendary value investor who runs mutual fund firm Third Avenue Management, signaled his confidence in the market (and his own stock-picking abilities) by pouring $3 million into his firm’s flagship Third Avenue Value Fund (TAVFX) during late 2008 and early 2009.

The bet continues to look prescient, with the fund up around 37% year to date. In a recent letter to investors, Third Avenue boiled down its philosophy: “in common stock investing, the sole, or almost sole, focus is on buying into well-financed companies at steep discounts from readily ascertainable NAV where there are reasonable prospects for double digit NAV growth over the next five years or so.”

So, which stocks fit the bill in the minds of Third Avenue’s managers?

Looking at Third Avenue’s top-15, U.S.-listed, equity holdings, which are aggregated across all its funds, one can see that the firm was increasing its holdings in a number of its largest stakes during Q3, including The Bank of New York Mellon (BK), waste management firm Covanta (CVA), independent oil and gas producer Encana (ECA), diversified conglomerate Leucadia (LUK), and drilling contractor Nabors Industries (NBR).

Third Avenue’s largest equity stake at the end of Q3 was in Brookfield Asset Management (BAM), where the firm was trimming shares during Q3. Third Avenue was also trimming stakes in communications equipment maker Sycamore Networks (SCMR), Korean steelmaker Posco (PKX), and independent oil and gas producer Cimarex Energy (XEC).

Looking at tickerspy.com’s graph charting the performance of Third Avenue’s end-of-Q3 holdings during the current quarter, one can see that the holdings have been beating the market. If you want to see how your performance stacks up to Third Avenue’s or see some of its other holdings, visit tickerspy.com to see the firm’s top holdings and a chart of their combined performance.

Pro portfolio performance is based on institutions’ top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.

Tags: BAM, BK, CVA, ECA, LUK, NBR, PKX, SCMR, TAVFX, XEC