Two Ways to Win for Value Investors
Interesting insights from the managers of the Third Avenue Small Cap Value fund (TASCX).
They define Resource Conversion as times when the markets don't reflect the business value in terms of the securities of those businesses. At such times the management of the companies or private buyers do realize that value and act on it to close the gap between market valuation and the value of underlying assets. This can take the form of M&A activity, buyouts, re-financings, spin-offs, liquidations, tender offers, special dividends and reorgs in or out of bankruptcy.
Examples from 2005 sighted: Sale of Ascential Software Inc. to IBM; CRT Properties Inc. to private investment group; Kmart merger with Sears.
Thoughts like this remind us that the market at large can be very wrong as to the long term value locked up in a stock. It's interesting to think about it this way as one market correcting another which is of course how all value is transferred.
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