Third Avenue Management
, founded by veteran value investor
, has reported to raising its shares of global communications
service provider Tellabs Inc. (
) by almost 53 percent as of Nov. 7, according to
GuruFocus Real Time Picks
This transaction elevates Third Avenue's ownership of the company
to 9.63 percent, according to a 13D SEC document filed yesterday.
Third Avenue previously owned 6.3 percent of the company at more
than 23 million shares; it is now at more than 35 million shares
after this recent purchase.
The company uses a "bottom-up" investment approach to manage its
portfolios, according to its website, "with the sole objective of
delivering superior returns with limited investment risk over the
long term." Its philosophy is also influenced by corporate
financial stability and opportunistic security selection, which
has driven Whitman several times to label himself an outside
passive minority investor (OPMI) but with a slightly different
approach than other OPMIs.
In Third Avenue's
third quarter shareholder letter
originally dated July 31, 2012, Whitman emphasized what set Third
Avenue apart from other OPMIs: "In striving to achieve
satisfactory returns on an overall risk adjusted basis, Third
Avenue's approach is markedly different from the approaches used
by almost all others who also are primarily OPMIs. Almost all
others are influenced strongly by the writings of Graham and Dodd
(G&D) and/or the teachings of most academics under the rubric
of Modern Capital Theory (MCT). The basic goal of both G&D
and MCT is to study the factors that affect market prices for
common stocks in OPMI markets, especially short run factors. For
Third Avenue, in contrast, the basic goal is to obtain deep
understanding of specific businesses and the securities they
issue, especially emphasizing long-term factors."
Third Avenue's holding history with Tellabs dates back since the
second quarter of 2009, when the fund started with a little under
25 million shares. Since then, Third Avenue has made several
reductions in the 2009 and 2010 quarters when Tellabs' market
price underwent a spike. Third Avenue then stocked up on Tellabs
shares in 2011 when its price deflated back down about $4.
TLAB data by GuruFocus.com
Headquartered in Naperville, Ill., Tellabs provides products that
fit the needs of several communications market such as cable,
enterprise, mobile, power utilities, telecommunications and even
the federal government. Its products enable services such as
broadband access, IP/Ethernet, network management, optical
networking and time division multiplexing, according to its
products description on its website.
With a market cap of $1.08 billion, Tellabs is currently trading
at $2.94 per share.
In October, Tellabs released its third quarter report revealing
lower revenue of $264 million compared last year's $330 million.
While it generated $10 million in cash from operations, Tellabs
also reported a net loss of $4 million in GAAP or $0.01 per
share, although still not as big a loss in the same quarter last
year, which amounted to a $130 million net loss in GAAP.
The report in October also announced a restructuring initiative
in Tellabs' business model by lowering its costs and expenses
starting the fourth quarter of this year, and increasing research
and development investments that will strengthen its
next-generation products, according to Tellabs chief executive
president, Dan Kelly.
Tellabs is scheduled to distribute a cash dividend of $0.02 per
share to shareholders on Nov. 30.
Third Avenue, home to mutual funds, separate accounts and
alternative investments, has an equity value of $4.21 billion,
and has 109 stocks in its portfolio. Technology appears in the
top five sector represented in its portfolio, along with
financials, basic materials, oil and gas and industrials.
Other tech stocks that appear in Third Avenue's portfolio include
Applied Materials Inc. (
) where it is 2.2 percent owner, Sycamore Networks Inc. (
) where it is 1.1 percent owner and Mantech International Corp. (
) where it is 0.86 percent owner.
Other Gurus who have holdings of Tellabs include Kyle Bass, Chuck
Royce and Jim Simons.
To view more articles about Martin Whitman and Third Avenue
Management, visit our GuruFocus archives.
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