Wednesday, February 25, 2009

Whitman's Kmart Investment

In an article that focuses on contrarian investing, Marty Whitman's old Kmart investment is detailed:

Also during that time, Marty Whitman, manager of the Third Avenue Value Fund, purchased bonds of K-Mart both before and after it filed for bankruptcy protection in 2002. He only paid about 20 cents on the dollar for the bonds. Even though, for a while, it looked like the company would shut its doors for good, Whitman was vindicated when the K-Mart emerged from bankruptcy and his bonds were exchanged for stock in the new company.

Shares jumped much higher in the years following the reorganization, and then were taken over by Sears Holding (nasdaq: SHLD - news - people ), which produced a nice profit for Whitman. Thanks to moves like this, the Third Avenue Value Fund has earned a market-beating 14.3% return since Whitman founded the fund in 1990.
The same post also takes a look at Buffett's initial investment in The Washington Post, which he bought during the bear market of '73-'74.

While the article is focused on contrarian investing--a style that we think has serious limitations (in that the main focus is on what others think as opposed to the true value for a stock and its price), it is well worth reading. Head to Forbes and see for yourself.

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