Finding Picks Well Off the Beaten Path

Michael Breen: Greetings, this is Michael Breen coming to you from the 2009 Morningstar Investment Conference. We've collected some of the best managers in the business, and we're fortunate to have one of them here with us right now, Amit Wadhwaney of the Third Avenue International Value Fund. How are you?

Amit Wadhwaney: Good, thanks. Thanks for having us here today.

Breen: You're welcome. You have an interesting fund. We like to say that you go so far off the beaten path that you don't even know there is a path. It's the epitome of a go-anywhere fund. And we've talked about a lot about the holdings, and I thought it would be instructive if we chat about one--Antarchile--which was a revelation to me when we talked about it. It's a holding company structure; nobody else in our database owns it. I was wondering how you get comfortable doing a deep dive on a firm like that, and coming away making it a decent-sized position.

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Wadhwaney: Antarchile, interestingly enough, is actually a fairly large company. Antar--in and as of itself--owns two other companies, amongst others. The two principally large holdings are a company called Copec, which is a very large pulp and paper manufacturer and wood products manufacturer, as well as a fuel distribution business across Chile. It's an extraordinarily profitable business, which generates over a billion dollars of free cash flow per annum, so that business can grow and grow quite nicely. It also owns about 8% of Chile's largest hydropower utility company called Colbun.

Now the valuation of Anter is truly eye-catching in that the market capitalization of Antar is exceeded by the value of its holding in Copec. So you're getting Colbun for nothing. You're getting a whole series of fisheries investments in the north and south of Chile for nothing as well. And of course you have a very, very good balance sheet. So were they to choose to expand their ownership in Colbun or Copec, or make yet other investments, there are other avenues of growth for this company.

Historically it's been conservatively and very, very brightly managed by some very smart people.

Breen: The interesting thing with a holding like that, when you tell me about it, it doesn't seem like it's that difficult to go through the financials and get the pieces of the puzzle, yet other managers don't do that. Is it just too much extra work? It doesn't seem like it's hidden assets. It's kind of all out there if you can go get it.

Wadhwaney: Curiosity? Intellectual curiosity. You look for opportunities where you can find them. Copec is a fine company. Colbun is a fine company. And when you look at these companies, always think about who owns these companies and what are their motivations? If you look around carefully, you'll see some interesting corporate relationships, corporate ownership. And one thing leads to another thing, and that leads to opportunity.