4 Tidbits from Third Avenue Value Fund's Q3 Letter

I just read through the third quarter shareholder letter from Marty Whitman at the Third Avenue Value Fund [TAREX]. Some tidbits from the letter:

1) The fund was hit with $500 million in redemptions in the quarter, and had to sell "non-core" positions. Cash in the fund is now at $719 million or 8.5% of assets.

2) During the quarter Whitman bought $1.5 million of the fund, bringing the total that he controls through his wife and others to 1.5 million shares. At the August 11 net asset value of $49.56, his stake is worth approximately $75 million, so he certainly has skin in the game. One of his senior analysts bought $200,000 of the fund also.

3) New position in Sycamore (SCMR) of 10 million shares. Increased position in Ambac (ABK) and MBIA (MBI).

4) Eliminated the fund's position in White Mountains Insurance (WTM). He explained in the letter - "None of the securities sales during the quarter were made for investment reasons; they were all made for portfolio reasons, so that the Fund could maintain an adequate cash cushion."

He defended his position in MBIA Insurance:

"it is theoretically possible that claims experienced over the next few years could be so bad that there would be little or no value for the common stocks of monoline insurers and mortgage insurers. To date, there is no credible evidence that this might be the case. A wipe-out of the equity seems remote."

Third Quarter Letter

Comments

[woodsey:]

Third Avenue Value Fund (TAVFX)
Third Avenue Real Estate Value Fund (TAREX)
Marty is a smart young fellow.

2008 Aug 23 08:18 PM

[User 209003:]

?

2008 Aug 24 09:44 AM

[granger:]

I agree completely. I always enjoy any comments from Whitman.

I have been a long term holder of TAVFX for many years.

I recently been doing a similar exercise as Whitman. I have been doing some heavy scrutiny of my portfolio. I have been cutting back my number of holdings and concentratin the assets.

I have been using two criteria of where to park the most capital. One is to individual stocks that have held up well during this entire credit crisis, both fundamentally and technically. Second, is to give capital to proven winners and unique assets.

Whitman fits the bill of my second ctiteria. During August and July, i have sold off several funds. I have given most of the assets to TAVFX. Almost tripling my positions since the beginning of July.

Disclosure: my largest fund & ETF positions are AOD, TAVFX, PRPFX and PDP. Largest individual stock positions: DHR, CNI, VFC, SYY, TECH, BWLD, TSCO and RPM.

What has everyone else been doing.

2008 Aug 24 10:40 AM

[ksmithdc:]

Interesting read.

2008 Aug 24 11:02 AM

[viewfromnyc:]

Third Ave Funds are likely to continue to be poor performers. From a macro perspective U.S. real estate is going nowhere any time soon, due primarily to the ongoing credit crisis. I don't have an opinion about Hong Kong or Japan but the weightings in cash and troubled U.S. stocks portend underperformance and continued redemptions. If this fund group has to start selling core positions, e.g. the large stakes in relatively small companies, the positive feedback loop will move in a negative direction. (Positive feedback loops amplify or accelerate trends, negative feedback loops dampen or decelerate trends). The managers of this fund have fallen in love with some stocks that are facing tremendous headwinds from macroeconomic conditions. Don't make the same mistakes fund management is making and fall in love with the fund because it has done well in the past. It will be of no consolation when your investment in this fund underperforms, that Mr. Whitman's investment also underperformed.

2008 Aug 24 01:05 PM

[Eric Fox:]

Woodsey.....SA put the symbol in. Also, Whitman a "young" fellow???

I should have disclosed that I am long WTM.

2008 Aug 24 02:14 PM

[Old Trader:]

granger,

AVK, ALD, CSE, ESOC, GMI, HTR, JNJ, LYG, MMP, O, PVX,PWE, SDS, UPS, cash.

2008 Aug 24 03:40 PM

[Old Trader:]

Oops, s/b GIM, not GMI

2008 Aug 24 03:41 PM

[irondoor91:]

You fellows post as if somebody gives a ---- about your positions. When disclosing, please give size, date of purchase, cost basis. Then, we can determine your positions. Of course, a photo of your most recent brokerage statement would suffice.

2008 Aug 24 11:41 PM

[deleeuw:]

On August 14 Third Avenue sold almost all its Tejon Ranch Company (TRC) stock -- they held 28% of the company through their various funds, and it was one of their biggest holdings (worth about $ 130M).

2008 Aug 30 12:05 PM