Matthew Fine, featured on 'Value Investing with Legends' podcast, discusses buying gray clouds and building resilient portfolios

Matthew Fine, featured on "Value Investing with Legends" podcast, discusses buying gray clouds and building resilient portfolios

Listen to the podcast here: https://pfc.ltd/?NTE3Mjc

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Interview Summary

Matthew Fine, Portfolio Manager of the Third Avenue Value Fund, joins the Value Investing with Legends podcast to share his perspective on Third Avenue's distinctive investment philosophy, global portfolio positioning, and the investment opportunities he finds most compelling today. Hosted by Professors Tano Santos and Michael Mauboussin of Columbia Business School's Heilbrunn Center for Graham & Dodd Investing, the conversation traces Matt's career from a college graduate who stumbled into Third Avenue at the peak of the dot-com bubble to a seasoned investor with 26 years of experience navigating some of the most dislocated markets in the world.

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Interview Highlights

• 07:03 Third Avenue's Roots and Marty Whitman's Legacy
  • Matt reflects on Third Avenue's founder, Marty Whitman, and the firm's origins in the distressed investing and restructuring world of the 1960s and 70s, a lineage that informs their current equity strategy.
  • Introduces the firm's core philosophy of "buying gray clouds and selling sunshine," deliberately seeking areas where pessimism has driven valuations to deeply discounted levels.
  • Matt compares Marty Whitman's investing lineage to the same deep-value tradition associated with investors like Sam Zell, Michael Price, and Seth Klarman.
• 08:52 The Credit Mindset as a Foundation for Value Investing
  • Matt explains why thinking like a credit investor applies to the type of equity investing Third Avenue practices.
  • Emphasizes the importance of prioritizing downside protection over near-term return potential.
  • Argues that balance sheet analysis, a creditor's instinct, is just as critical in equity investing as it is in credit.
• 11:12 Lessons from Argentina: A Crash Course in Emerging Market Crises
  • Matt recounts his first international assignment as a young analyst, investing in Argentina during its sovereign default and currency crisis, four presidents in two weeks, a broken currency peg, and citizens storming bank branches.
  • Describes buying government IOUs and a U.S. dollar-denominated agricultural company amid the chaos, investments that proved highly successful.
  • Explains how early exposure to extreme dislocations shaped his conviction that the best investments are often found in the most uncomfortable environments.
• 14:13 Generalists vs. Specialists: Third Avenue's Approach
  • Matt explains why an opportunistic, go-anywhere strategy requires a team of generalists who can be deployed into any perceived opportunity across sectors, geographies, and security types.
  • Shares his view that he would rather be the 10th or 20th most knowledgeable person about a great investment than the world's foremost expert on a mediocre one.
  • Notes that the vast majority of securities in the world at any given time are simply of no interest to Third Avenue, priced right or overpriced, making broad, deep coverage an inefficient use of resources.
• 18:08 Financial Strength and Resource Conversion: The Twin Pillars
  • Matt unpacks the two non-negotiable elements of Third Avenue's investment process: financial durability and resource conversion.
  • Stresses that companies must be able to survive until recovery arrives, however long that takes, before any other investment criteria matter.
  • Explains how well-capitalized companies can compound value through counter-cyclical acquisitions, buybacks, and strategic transactions that financially weaker competitors simply cannot execute.
• 23:39 Understanding the Other Side of the Trade
  • Matt describes his practice of reading sell-side research voraciously, not to be influenced by it, but to understand the source of consensus negativity and what would need to change for perceptions to shift.
  • Contrasts Third Avenue's multi-year investment horizon with the average U.S. actively managed fund, which turns over its entire portfolio roughly every six quarters.
  • Introduces Bank of Ireland as a case study: purchased at roughly 40% of book value with a 5% ROE and a ~12% going-in owner's yield, with multiple headwinds that he believed were more likely to ease than worsen over time.
• 33:38 European Banks: From Crisis to Recovery
  • Matt walks through Third Avenue's investments in Bank of Ireland and Deutsche Bank, and the broader European banking recovery driven largely by interest rate normalization.
  • Explains how Bank of Ireland absorbed two exiting competitors, KBC Ireland and Ulster Bank, because its strong financial position allowed it to act counter-cyclically when others could not.
  • Details the bank's transformation from a 5% ROE business to a mid-to-high-teens ROE today, and how it also acquired asset management businesses during the downturn, a textbook resource conversion outcome.
• 40:30 CK Hutchison: A Resource Conversion Story in Motion
  • Matt details Third Avenue's position in CK Hutchison, the Hong Kong-based conglomerate founded by Li Ka-shing with a decades-long record of building and monetizing global businesses across ports, telecom, retail, and infrastructure.
  • Discusses the high-profile and politically charged proposed sale of 43 global container terminals to a BlackRock/MSC consortium, including two terminals at either end of the Panama Canal, and the geopolitical firestorm it ignited in Washington.
  • Matt argues that the Panamanian Supreme Court effectively stripped CK Hutchison of its concessions, and that this may ironically ease the path to completing a transaction on the remaining 41 terminals, with the company simultaneously pursuing potential IPOs or sales of its health and beauty retail and European telecom businesses.
• 44:07 Copper: An Indispensable Commodity with Visible Supply Constraints
  
  • Matt makes the case for copper as a uniquely investable commodity, with durable, diversified demand and structurally constrained supply, contrasting it with commodities like lithium and cobalt.
  • Notes that copper demand has grown steadily at roughly 2.5-3% annually for over 100 years, driven by virtually every form of economic development, from construction to EVs to AI data centers.
  • Highlights the supply side as the key differentiator: greenfield copper mines take an average of 15 years to permit, build, and bring into production, making future shortfalls visible well in advance.
• 48:38 Japan: Deep Value, Structural Change, and Patience Required
  • Matt discusses Third Avenue's meaningful exposure to Japan, including positions in Subaru, semiconductor capital equipment makers JEOL and Horiba, consumer products distributor Paltac, Taiheiyo Cement, and titanium sponge manufacturer Osaka Titanium.
  • Highlights JEOL as an example of exceptional positioning: one of only two companies in the world that makes multi-beam mask writers, which are required to produce masks for ASML's extreme ultraviolet lithography machines, the equipment behind the world's most advanced chips.
  • Argues that the current push for improved shareholder returns feels structurally different from prior waves because it is being driven from within Japan, by the Tokyo Stock Exchange, domestic pension funds, and industry bodies, rather than by outside pressure.
• 54:57 What Keeps Matt Up at Night, and What Excites Him
  • Expresses concern about the historically elevated valuation of U.S. equities and the statistical base rates that suggest poor forward returns from these levels, noting the challenge of creating distance from the "blast zone" as a long-only fund.
  • Notes his genuine excitement about managing Third Avenue's strategy, originally built by Marty Whitman for environments of rising rates and scarce capital, in what may finally be the environment it was designed for after 40 years of declining rates.
• 56:52 Book Recommendations
  • How the World Really Works by Vaclav Smil, a grounding look at the physical materials and processes that underpin modern civilization, and why they remain deeply underappreciated.
  • Pioneering Portfolio Management by David Swensen, Matt's pick for one of the best investment books he has ever read.
  • Ten Global Trends Every Smart Person Should Know by Marian Tupy, a data-driven chart book making the case that, by nearly every historical measure, we are living in an extraordinary and fortunate time.

Past performance is no guarantee of future results; returns include reinvestment of all distributions. The above represents past performance and current performance may be lower or higher than the performance quoted above. Investment return and principal value fluctuate so that an investor's shares, when redeemed, may be worth more or less that the original cost. For the most recent month-end performance, please visit the Fund's website www.thirdave.com.

Click here for standard performance.