The Third Avenue Value Fund (TAVFX) is run by the well-respected Martin Whitman, and has a market-beating 10-year average return. So when Whitman speaks, it's usually worth listening. Thus, I was interested to read some of Mr. Whitman's thoughts in his letter to shareholders for the quarter ending in January.
For one thing, Whitman noted that all the stimulus packages may well lead to significant inflation in the years to come. If inflation ensues, he pointed out that keeping money in cash or U.S. Treasuries paying 3% or less would be a wealth-shrinking proposition.
One hedge against inflation is to invest in the stock market, because many corporations have the power to pass along price increases they face to their customers. Whitman is aware of this, and he noted that he has personally been buying up shares of his own fund -- to the tune of more than $3 million worth over the previous few quarters.
That announcement made me sit up -- not just because of its mention of inflation, but because it reflects a fund manager eating his own cooking in a big way. That's something great to see in a fund, because let's face it -- why wouldn't a fund manager have a lot of her own money in her fund, if she's really investing it in her best ideas?
Unfortunately, that's not nearly as common as you'd think. According to Morningstar, as of October, nearly half of all stock funds had managers who hadn't invested a penny of their own money in them. Yikes. Fortunately, there are plenty of believers among fund managers. For example, there's Neil Hennessy of the Hennessy Focus 30 (HFTFX) fund, and Ron Muhlenkamp of the Muhlenkamp (MUHLX) fund, both of whom own at least $100,000 in funds they manage, according to SEC filings.
Funds aside, it's also heartening when you see a company's managers with hefty stakes in the business, as it suggests that their own financial interests are aligned with yours. Here are some:
I ran a screen of our Motley Fool CAPS investor community for stocks with CAPS ratings of four or five stars (out of five) where the corporate bigwigs have at least 5% stakes:
|
Company
|
CAPS Stars
|
% Insider Ownership
|
|
Coca-Cola (NYSE: KO )
|
****
|
5%
|
|
Fastenal (Nasdaq: FAST )
|
****
|
12%
|
|
FedEx (NYSE: FDX )
|
****
|
5%
|
|
Marvell Technology (Nasdaq: MRVL )
|
****
|
17%
|
|
Oracle (Nasdaq: ORCL )
|
****
|
23%
|
|
Schwab (Nasdaq: SCHW )
|
****
|
18%
|
|
Hess (NYSE: HES )
|
*****
|
12%
|
Data: Motley Fool CAPS.
With both stocks and funds, it can be good to look for insider ownership. Whether you make money or lose it, it's good to know that your managers are right there with you.
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