Better Know a Fund Manager

Welcome, Fools, to part eight of our several-thousand-part series, "Better Know a Fund Manager," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

Source: Third Avenue Funds.
*Refers to average annual returns.

Meet Marty Whitman
The fightin' team at Third Avenue Value is led by Marty Whitman, who founded M.J. Whitman in 1974 and launched his current fund from his Third Avenue office in midtown Manhattan in 1990. Since then, the fund has become a 10-bagger, with an average annual return of 16.74%.

No wonder Syracuse University, the alma mater he and I share, named its business school after him. Well, it was because of that and the multimillion-dollar donation he and his wife, Lois, provided. Oh, don't worry, he can afford it. Back in the '70s, he bet $100,000 on mortgage bonds in bankrupt Penn Central Railroad and quintupled his money in a year. Now, that's some zazz, baby.

But sticking it to white-shoe stockinistas is par for the course for the sweats-wearing Whitman. Not even revered former Fed chief Alan Greenspan is safe from a skewering. Whitman told Fool co-founder Tom Gardner in a 2003 interview that Greenspan "is utterly irrelevant" from an investor's perspective. Eat that, Wall Street.

How he invests
And Whitman treats investing dogma the way most dogs will treat a fire hydrant. Doing so has allowed him to rack up remarkable gains for investors in Third Avenue Value. For example, Whitman told Tom that he and his team years ago bought the bank debt of Anglo Energy, which became stock in oil and gas driller Nabors Industries (NYSE:NBR). He earned at least a 16-bagger as a result.

Of course, at his core, Whitman remains a value investor. His mantra, he says, is to buy "safe and cheap," with safe always coming first. Practically, that means he tends to buy stocks that sell for 50 cents on the dollar or less and have close to no chance of further capital loss. A more in-depth explanation of his thinking is available in the two popular texts he wrote on investing -- Value Investing: A Balanced Approach and The Aggressive Conservative Investor. You can bet he uses both in his teaching duties; Whitman has taught at the Yale School of Management for more than 30 years.

Don't think that means he's out of trick plays, however. When it comes to Third Avenue Value, anything is possible. For example, only 65% of the fund was invested in common stocks at the end of January. More than 6% was in corporate debt, including bonds from Sears (NASDAQ:SHLD) and building-materials supplier USG (NYSE:USG).

Is this fund for you?
Should you find a spot for Third Avenue Value in your fund portfolio? The Syracuse orange blood coursing through my veins says yes, as does Motley Fool Champion Funds advisor Shannon Zimmerman. He named Third Avenue Value a champ in April of 2004, and it has performed brilliantly ever since, up more than 34 percentage points versus the benchmark. (And it isn't the only one to do well in Champion Funds; try the service free for 30 days to learn more.)

But before buying shares, remember that roughly 35% of the fund is invested in bonds and cash, so it's probably not a good idea to couple Third Avenue Value with PIMCO Total Return (FUND:PTTAX) or another bond fund. Growth-huggers won't find much to like, either. Third Avenue Value's largest stock holdings are in real estate companies such as Forest City Enterprises (NYSE:FCEA) and St. Joe (NYSE:JOE). That, however, should be a comfort to the Foolish buy-to-hold crowd. Whitman has rewarded their loyalty before and is very likely to do so again.

And that's this week's profile. See you back here next week, fund nation. Good night.

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Fool contributor Tim Beyers is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what else is in Tim's portfolio by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.