A good read from the NYT for fundies & contrarians
http://www.nytimes.com/2005/04/17/bu...ey/17intl.html
Note comments on Toll NZ.
It's What He Doesn't Do That Seems to Pay Off
By TIM GRAY
AMIT B. WADHWANEY, manager of the Third Avenue International Value fund, likes to talk about what he doesn't do.
He says that he doesn't pay much attention to corporate earnings projections. He doesn't try to balance, or even gauge, his fund's investments in regions, industries or market sectors. He doesn't heed macroeconomic forecasts. And he doesn't use market indexes as benchmarks for his stock picks or his fund's performance. "I have no clue whether stocks in the portfolio belong to an index, and I don't really care," he said recently in a conversation at his Manhattan office.
Mr. Wadhwaney's willingness to ignore Wall Street's typical measures and means has paid off. His fund has returned 26.7 percent in the 12 months through Thursday, according to Morningstar.
International Value's performance has bred popularity. Since the beginning of 2004, the fund has swelled to more than $1 billion in assets from $140 million. In the early part of this year, new money from customers was surging in faster than Mr. Wadhwaney, 51, was willing to invest it. The fund's cash hoard hit 35 percent at the end of January. Hoping to slow the flow, Third Avenue Management pulled the fund from the Charles Schwab Corporation's no-transaction-fee mutual-fund exchange, making it harder for Schwab customers to buy the fund's shares.
"We're employing cash at a fairly brisk clip," Mr. Wadhwaney said. "But it's coming in a lot faster."
International Value's cash trove stems partly from his management style. He is finicky, often watching a company for years before buying. He won't buy a stock unless he is convinced of its long-term durability - he likes to hold shares for at least two to five years - and until he believes that the value of its net assets, per share, exceeds its price.
"Third Avenue is very strict about their discipline," said William S. Rocco, a Morningstar senior analyst. "If there's not a suitable investment, they won't invest."
Mr. Wadhwaney's willingness to hold shares means low turnover for the fund: about 10 percent annually, compared with its peers' average of more than 100 percent. It also means that fees are below average: the fund's annual expense ratio is 1.45 percent, compared with 1.85 percent for its peers, according to Standard & Poor's. (International Value is a no-load fund, but it does charge investors who stay less than a year a 2 percent redemption fee.)
International Value also holds fewer stocks than most: 47 at the end of January, about half the number that would be typical for the average fund of its size, analysts said.
Mr. Wadhwaney's contrarian streak means that people who prize predictability may not like the fund, said Rosanne Pane, director and mutual fund strategist at S.& P. "He has an unusual approach, and people investing in the fund have to understand that," she said. "You'll see stocks you've never heard of before, and you're not going to see famous names like Sony."
Instead, investors will encounter stocks from places like Norway and New Zealand, two countries that together accounted for nearly a third of the fund's assets at the end of January. The fund's biggest holdings then were Toll NZ, a New Zealand freight handler, and Aker Kvaerner ASA, a Norwegian oil services company.
"What distinguishes these guys is that they're willing to look at stuff that's deeply discounted and out of favor," Mr. Rocco said. "If that means they have a lot of exposure to Norway, so be it."
Another quirk that distinguishes Mr. Wadhwaney and the analysts who work with him - Jakub S. Rehor and Matthew P. Fine - is that they are acolytes in what Mr. Rocco called the "Church of Marty." Marty, as he is known to the staff at Third Avenue Management, is the founder, Martin J. Whitman, 80, who started the flagship Third Avenue Value fund in 1990. Since then, the company has added three funds, including International Value. It also