«Call it overkill,» he writes, «but it is also quite comfortable to be invested in
common stocks of companies whose solvency is not close to ever being in question.»
The last thing TAM portfolio managers and analysts want to do is invest in
the common stocks of companies whose financial statements are incomprehensible, or almost so.
Cyclical stocks:
Common stocks of companies whose prices vary directly with the business cycle.
Not exact matches
One
of the earliest examples was the International Silver
Company,
whose common stock (issued in 1898) had no voting rights until 1902 and then only received one vote for every two shares.
MLPs: Master Limited Partnerships (MLPs) are limited partnerships or limited liability
companies that are taxed as partnerships and
whose interests (limited partnership units or limited liability
company units) are traded on securities exchanges like shares
of common stock.
Master Limited Partnerships (MLPs) are limited partnerships or limited liability
companies that are taxed as partnerships and
whose interests (limited partnership units or limited liability
company units) are traded on securities exchanges like shares
of common stock.
The bottom - up analyses center on the facts that the businesses in which Third Avenue has invested are all eminently creditworthy; that the
common stocks were acquired at a significant discount to our estimate
of NAV; and that the
common stocks are the issues
of companies that provide comprehensive, written disclosures; and are regulated by government agencies
whose principal interest seems to be investor protection.
There is now a general sense
of rebellion against security analysts, who during the period prior to April 2000, were putting out strong buy recommendations for dot com
common stocks, telecom
common stocks, and other issues
of companies whose only apparent real asset was an ability to sell new issues to the public at ridiculous prices.
Incidentally, the various IFRS - reported NAV
companies whose common stocks are in TAM portfolios do pay modest dividends, which have been increasing modestly year by year for most
of the TAM holdings.
For perhaps 90 % or more
of companies whose common stocks are publicly traded, 90 % to 95 %
of the time, NAV or book value will increase in each reporting period.
In the case
of the Fund, though, a need for access to capital markets for the
companies whose common stocks are in the portfolio is virtually nonexistent.
TAVF remains reluctant to hold the
common stocks of highly leveraged holding
companies whose principal assets, on a parent
company basis, are the
common stocks of highly leveraged, highly regulated subsidiaries.
Managements
of the
companies whose common stocks are in our portfolios tend to be non-promotional and highly conservative, willing in up periods to sacrifice returns on equity and returns on assets for safety.
Selling add - on issues
of common stock is a very dicey game for most managements
whose companies are not benefiting from the presence
of speculative bubbles such as existed in 1998 and 1999.
In the above - mentioned list
of companies,
whose common stocks all are selling at meaningful discounts from NAV and which also enjoy super-strong financial positions, long - term returns to TAM investors would likely be more than satisfactory, if the individual issuers could increase their NAV after adding back dividends by at least 10 % per annum compounded.
Most
of the
companies whose common stocks are held in Third Avenue Management portfolios are in an especially good position to make distributions to
common shareholders, especially to conduct long - term programs to repurchase outstanding
common stock.