Veteran value investor Martin Whitman is starting a new small cap mutual fund. 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". One of the 9 positions that he has established in the $11 million fund is FSII, since in his opinion "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: . . .
* 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. . . . . |
