If I was a mutual fund type guy, here's one I'd invest in. Whitman is a sharp guy. Note that he states "We like to buy stocks that sell at 50 percent of their private market value. But the companies have strong balance sheets, large cash positions and good management."
Buy a good company at a reasonable price and we should do well. FSII sure qualifies, he notes "the stock is cheap relative to future earnings":
Copyright 1997 American Lawyer Media, L.P.
BROWARD DAILY BUSINESS REVIEW
July 14, 1997 Monday
New funds: Promising if untested
BYLINE: ALAN LAVINE
Just what investors need. Another new mutual fund that's touted as the greatest thing since sliced bread. There are already 8,000 mutual funds to pick from. Who needs another?
Maybe you -- at least when a well-established fund group comes out with a new fund or somebody has a great idea. First, you've got the expertise of an experienced investment adviser at the helm. Plus, new funds often have more flexibility to move in an out of attractive stocks.
On the negative side, new funds are untested. So you don't know how they will perform in up or down markets. Typically, you should see how a new fund performs over at least two or three years before you invest. There are exceptions. Here are a few: . . .
Look for promising returns from the Third Avenue Small Cap Value Fund. This no-load fund is managed by Martin Whitman and Curtis Jensen. Whitman is manager of the Third Avenue Value Fund, which invests in undervalued large companies. Since inception in November 1990,Whitman's fund gained 22 percent and is rated five stars by Morningstar Inc., Chicago.
The Small Cap Value fund uses the same stock-picking tactics as its big sister. The fund invests in out-of-favor small companies selling at rock-bottom prices. The companies, however, have solid financial positions. Unlike other small company stock funds, this fund only intends to own only 30 to 40 stocks. So the fund has more upside potential than a fund that owns more stocks.
"The companies we buy have dismal outlooks and earnings look bad over the short-term," Jensen says. "We like to buy stocks that sell at 50 percent of their private market value. But the companies have strong balance sheets, large cash positions and good management."
The new fund has just $ 11 million in assets and owns nine stocks. Jensen is investing money coming into the fund into attractive companies. He sees opportunities in industries that are consolidating such as financial services, semiconductors and insurance. For example, the fund holds stocks like:
* Financial Security Assurance. This company insures municipal bonds and asset-backed securities. The stock has sold off due to interest rate fears and problems with auto loans. But management is strong and the company sells below book value. Earnings are growing at 12 percent to 15 percent annually.
* Glenayer Technologies. The company supplies equipment for paging devices. The short-term outlook for the industry is poor. But the company has a strong balance sheet and plenty of cash on hand. Earnings should improve over the next couple of years.
* FSI International. The company manufactures semiconductors. The industry has been in a downturn. FSI earnings have declined. But the company is putting money into plant and equipment. Business should improve. Meanwhile, the stock is cheap relative to future earnings.
. . . . |
