Martin Whitman

In yesterday’s post I mentioned an article which mentioned some funds that have not beaten Bill Miller’s Value Trust fund on an annual basis, but have done better if one looks at a 15-year time frame. One of those funds is Martin Whitman’s Third Avenue Value Fund. Apparently his fund had a 16.49% annualized return in the last 15 years and “did so with less than two-thirds of the volatility of Legg Mason Value Trust” while Bill Miller’s had a 16.44% annualized return. Whitman’s fund is heavy in financials and producer manufacturing whereas Bill Miller (supposedly a value investor) likes risky stocks like Google, Amazon, and eBay. His top two sectors are consumer discretionaries and information technology. I’m not going to second-guess Bill Miller’s stock picks as he clearly does well, but I think I would much more comfortable with Whitman’s fund than Miller’s. Surprisingly Whitman’s fund has an MER of only 1.12%.

Here’s an interesting interview with Whitman from July 1999: “The Public Be Damned – Martin Whitman of Third Avenue Value Fund.” It’s a good read. People were taking money out of his fund en masse, forcing him to sell off stocks rather than buy:

the 74-year-old Whitman is not comforted much these days by knowing he’s done better than many of his peers. Investors were taking money out of Third Avenue Value at a rate of about $55 million a month, and if this keeps up into fall, the fund could shrink to half its former size. That leaves Whitman always deciding what to sell rather than what to buy. “As for dealing with the public,” he says with undisguised relish, “you may quote me: Screw ’em.”

That was in 1999. So how well would investors have done had they stayed with Whitman from 1999 to 2006? Take a look at this chart, going back to mid-1996. Third Avenue Value fund is shown in blue. It starts in mid-1999 below the S&P500 (in green) but would have ended up above the S&P500 by 2003. Investors who sold Third Avenue Value fund in 2000-2001 and bought the Nasdaq (shown in black) instead would be even sorrier.

Unfortunately his fund is only available to people in the US. The only Canadian company I found using Third Avenue for their sub-advisor is AIC Global Focused Fund. It is a new fund and it’s performance isn’t yet posted. Not managed strictly by Whitman, but Third Avenue “adheres to a disciplined value investment approach.” This fund doesn’t seem to match any of the funds on Third Avenue’s website.

4 thoughts on “Martin Whitman”

  1. Interesting post. I think it is good to take a look at what the fund managers that have been able to beat the market over at least a 3 to 5 year time frame.

    Just a minor point though, it looks like the link to Whitman’s fund’s performance from 1996-2006 is broken.

  2. Loi: I am definitely considering it as well if I can get my hands on it somehow from Canada. I think my idea US portfolio would be 50% RSP and 50% TAVFX. He is getting old though; I just hope that his underlings remain devoted to the same value philosophy that he did.

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