Wednesday, January 9, 2008
Amit Wadhwaney says we've got a great opportunity today.
I agree with him.
Wadhwaney manages the Third Avenue International Value Fund (TAVIX). Third Avenue was founded by legendary value investor Marty Whitman in 1986. Whitman has since surrounded himself with equally talented fund managers...
Under Wadhwaney, TAVIX has returned average annual gains of 20% since inception in 2001. Wadhwaney focuses on companies that are trading at steep discounts to their net asset values. "Most companies we buy tend to be suffering," he says. "Either as a company or as part of an industry, they've encountered some sort of difficulty."
However, as international markets soared between 2001 and 2005, Wadhwaney's job got a whole lot more difficult. With valuations skyrocketing, he faced a shortage of great value opportunities. At one point, he had as much as 50% of the fund's portfolio in cash. So in July 2005, he closed the fund to new investors.
Fast forward to 2007. Last year was a volatile year for investors. Between the subprime-mortgage meltdown and the credit crunch, stock markets had a truly bumpy ride. And as is the case with any market correction, great values appeared...
"The whiff of panic currently blowing through the financial markets has the potential to present tremendous buying opportunities," Wadhwaney wrote in his latest shareholder letter. So he re-opened his fund to investors in December 2007.
He's not the only one.
Another legendary value-focused family of funds, Oakmark, reopened the Oakmark International Fund (OAKIX) and the Oakmark International Small Cap Fund (OAKEX) to investors on January 2. Like Third Avenue, Oakmark focuses on investing in deeply undervalued companies to produce above-market returns.
Since their inception (in 1992 and 1995, respectively) the two funds have returned average annual gains of 12% and 13%.
"We're excited about the investment opportunities we're seeing around the world and believe that restoring the balance between purchases and sales is in the best interest of Fund shareholders," said fund manager David Herro.
So while many investors are wringing their hands about where to put their money in 2008, international investors are virtually clapping their hands with glee.
Here's where they're finding the most value...
Currently, Wadhwaney favors agriculture companies. He has nearly 11% of his holdings in the sector. His favorite investment is Saskatchewan Wheat Pool, which controls 42% of western Canada's wheat market. It's the lowest-cost producer in Canada, and trades at about 10 times pretax earnings.
In contrast, David Herro prefers international financials. Three of his top 10 holdings are UBS (eight times earnings), Credit Suisse (five times), and HSBC (13 times). Combined, these three companies account for 10% of his portfolio.
If you're looking for leads on cheap international stocks, these portfolios might be a good place to start.
$875... Kinross Gold, Goldcorp, Barrick Gold, and Agnico-Eagle hit new 52-week highs.
Gotta keep the lights on... Constellation, FirstEnergy, Entergy, Public Service, and Southern Co. at new highs.