Thoughts on Marty Whitman's 2008 Inverview - Part 1

    The interview in the previous post was conducted at the end of 2008. Russell was being very kind when he mentioned that "last year, you lost a fair amount of money." For the calander year 2008, Third Avenue Value Fund declined by 45.61%.

    It gets worse. The fund also declined sharply in the last few months of 2007. The declines then continued until March 6, 2009. Culminating in a loss of over 12% for February 2009 alone. MFM did a little research, got the figures, took into consideration distributions, and here's what he found. From a peak per share price of $67.78 on October12, 2007 to a trough price of $25.45 on March 6, 2009, Third Avenue Value Fund declined by 61.15%.

    A $10,000 investment would have declined to about $3,885 in the space of about 16 months. This is in a fund run by a man who really knows what he is doing, a man who can even be considered legendary. This is in a fund with "Value" in its name, a fund which has a slogan "cheap but safe", and fund that, in Marty's words buys in "at huge discounts to readily ascertainable net asset value."
 
    Marty's response: "Well, ... the strategy never works consistently." Important lesson. Quite true, but MFM doesn't think it would look too good in promotional literature or as an advertising slogan. Can you imagine?

                     "Third Avenue Funds. Our Strategy Never Works Consistently."

   But Marty is just being honest. And notice how he accepts the decline with equanimity. His focus is on the performance of the underlying companies, not on market pricing which he judges to be irrational. He feels like he will be okay since his companies have experienced almost no "permanant impairments of capital."