Monthly Archives: April 2009

Soapstone Networks Reports Q1 2009 Results

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GAAP loss from continuing operations for the first quarter ended March 31, 2009 was $8.1 million, or $(0.55) per share, compared to a GAAP loss from continuing operations of $5.5 million, or $(0.37) per share, in the prior year’s first quarter. Including income from discontinued operations, GAAP net loss for the first quarter ended March 31, 2008 was $3.7 million, or $(0.25) per share. Because there is no income from discontinued operations after December 31, 2008, GAAP net loss for the quarter ended March 31, 2009 was the same as GAAP loss from continuing operations for the same period.



Highlights from Conference Call


- Cash, cash equivalents and marketable securities totaled $82.3 million at March 31, 2009.


- The company, which said in February it was exploring strategic alternatives, expects severance and related costs of about $500,000 in the second quarter.

- Management sees overall incremental savings of about $3.0 million during 2009 as a result of the job cuts announced April 14, in addition to the $5.0 million in savings it expects from a workforce reduction it announced in February. Since Feb 12, 2009 permanent headcount has been cut by about 10 percent and contractor workforce by about 75 percent.

Updated Valuation


Not much has changed since our March 9, 2009 post on SOAP, with the exception of nearly $8 million cash burn relative to the December 31, 2008 results. Because of this, net-cash value has been reduced to $5.33/share, a substantial difference compared to its current market price of $3.63/share. We added SOAP to our portfolio when it was trading at $2.86, for an unrealized gain of nearly 27%.



SOAP's Balance Sheet as of March 31, 2009



Vanda Pharmaceuticals Reports Q1 2009 Results

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VNDA reported a net loss of $6.5 million for the first quarter of 2009, compared to $7.5 million for the fourth quarter of 2008. Total expenses for the first quarter of 2009 were $6.6 million, compared to $7.7 million for the fourth quarter of 2008. Research and development (R&D) expenses for the first quarter of 2009 were $2.3 million, compared to $3.6 million for the fourth quarter of 2008. The decrease in R&D expenses in the first quarter of 2009 relative to the fourth quarter of 2008 is primarily due to the decrease in regulatory consulting and other professional fees.

As of March 31, 2009, Vanda’s cash, cash equivalents, and marketable securities totaled approximately $42.6 million. As of March 31, 2009, a total of approximately 26.7 million shares of Vanda common stock were outstanding. Net loss per common share for the first quarter of 2009 was $0.24, compared to $0.28 for the fourth quarter of 2008.


On November 6, 2008, Vanda submitted a Complete Response to the not approvable action letter that the Company received from the U.S. Food and Drug Administration (FDA) on July 25, 2008 regarding iloperidone. The FDA accepted the Complete Response for review and has set a new target action date of May 6, 2009. Pending a response from the FDA, Vanda is concentrating its efforts on the design and evaluation of clinical development options for tasimelteon, its compound for sleep and mood disorders, including Circadian Rhythm Sleep Disorders.


On February 13, 2009, shareholder Kevin Tang, Managing Director of Tang Capital Partners LP, sent a letter VNDA’s board urging them to immediately cease operations and return all remaining cash to shareholders. Kevin Tang disclosed his 15% stake in VNDA along with his associates in an amended 13D notice. Mr. Tang has said he plans to nominate two members to the company’s board and seeks to replace the company’s CEO. If Tang’s attempt to liquidate the company is successful, shareholders would receive nearly $1.42/share cash return, a potential 40% gain relative to VNDA’s current market price of nearly $1/share.


Cash & Cash Equivalents: $42.6M

Total Liabilities: $3.9M


Liquidation Value, excluding PPE: $38.7M ($1.42/share)

Current Market Price: $26.2M ($0.98/share)




Disclosure: We do not have an actual position in VNDA.

En Pointe Technologies, Inc (NASDAQ: ENPT)

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We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio. On March 1, 2009, the company agreed to be acquired for $2.50/share in cash. This represents a potential 13% absolute return relative to the company’s current price of $2.22/share if the merger is materialized, which we expect it will.




En Pointe Technologies, Inc., through its subsidiaries, provides information technology hardware and software products and services in the United States. The company offers a range of hardware and software products, such as desktop and laptop computers, servers, monitors, memory, peripherals and accessories, operating systems, application software, and consumables and supplies. It serves large and medium sized companies, and government entities. The company was founded in 1993 and is headquartered in Gardena, California.




ENPT’s Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors, has approved the merger agreement and resolved to recommend that the Company’s stockholders vote in favor of the agreement. Pursuant to the terms of the merger agreement, the Acquiror has agreed to pay to the Company’s stockholders $2.50 in cash for each outstanding share of the Company’s common stock. The merger agreement contains customary representations, warranties and covenants made by the Company, including covenants that the Company will run its business in the ordinary course of business consistent with past practice and will refrain from taking certain actions between the date of the merger agreement and the date of closing of the merger.


We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio because we believe the probability that the merger will consummate before the end of Q3 is fairly high. Therefore, we see this investment as one which can provide us with a quick 13% absolute return with little to no risk.


The proxy statement submitted by ENPT regarding the special shareholder meeting prior to merger approval can be found here.



Disclosure: We currently have a position in ENPT

Activists Must Adjust Their Aim

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(April 27, 2009 WSJ)


By Gregory Zuckerman

 Bill Ackman: Uneven at Target by Gary Hovland

It’s hard to scare a target when you are on the run yourself. But that is the awkward position in which activist investors find themselves.

Activist funds lost almost 10% in the first two months of this year, after falling almost 31% last year, according to Hedge Fund Research. That’s worse than other hedge funds and in line with the overall market, suggesting that many are simply long-only investors who take concentrated positions in single stocks.

Meanwhile, many of the largest activists are dealing with unhappy investors who are fleeing their hedge funds. A focused fund started by William Ackman succeeded in getting Target to buy back shares, among other things. But Target has resisted some of his other suggestions. And amid the market downturn, Mr. Ackman’s Target fund has lost more than 50% since its launch.

Despite such setbacks, activists might again be trying to flex their muscles, pumped up by gains of 9.3% in March. Carl Icahn has been pushing top executives at Amylin Pharmaceuticals to trim waste and not resist any possible sale. Smaller hedge funds such as Ironfire Capital are preparing to launch campaigns, according to people familiar with the matter.

The question is what playbook will work in today’s environment. Activists have spent much of the past few years pushing companies to take on more debt and pay out cash to shareholders. It turns out that many of the companies were correct to try to conserve cash for a rainy day, given the tsunami in the markets and economy that subsequently resulted. Companies should easily shrug off pressure to return cash right now.

Another activist favorite, pressuring companies to break up or sell themselves, also could be a challenge. Financing markets remain in disarray and valuations are distressed in many cases.

And such attempts have included notable failures. Investors jumped into Yahoo stock when Mr. Icahn last year pushed the company to sell to Microsoft, figuring he could bridge the gap between the two sides. But they still are dragging their feet, and Yahoo is down more than 40% since he got involved.

A more fruitful area could be on forcing cost cuts. Activists have often targeted entrenched and overpaid managers they believe are looking after themselves rather than shareholders. With many executives receiving generous compensation packages, even as their companies struggle, there could be plenty fodder for activists. A range of academic research suggests that hedge-fund activists have had a positive impact in areas such as reining in executive pay and perks.

Research also shows that activists can have a positive impact on long-term share prices, although some studies cover bull-market periods when companies could be successfully prodded to sell themselves or certain assets and pile on debt to boost payouts. In today’s leaner times, activists have their work cut out demonstrating that they aren’t a spent force.


New SEC Rules Favor Activist Investors

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 An article in today’s Wall Street Journal explores how activist investors will benefit from a change in SEC rules banning brokers to vote on their client’s shares. According to the article, brokers have typically voted in favor of standing management and board members thanks to the rule put in place in 1937. A ban to this practice would give activist investors more power by eliminating these management-friendly votes and would allow them to get closer to a majority.

Source: Change to Win, a labor group that opposes Mr.Lewis's re-election

Source: Wall Street Journal



SEC Plans to End Broker Vote Rule, in Win for Activists


In a major win for activist investors, the Securities and Exchange Commission plans to toss out decades-old rules in a move that will give activists significantly more power to determine who sits on corporate boards.

The rule change centers on a technical issue: Whether brokers are allowed to vote on their clients’ behalf in director elections. Since 1937, the brokers have been able to vote their clients’ shares, and have typically voted in favor of standing managements and boards.

But starting in January, the SEC will change those standards, say people familiar with the matter. The SEC is expected to announce the rule change as early as next week, these people say. Brokers won’t be able to vote their clients’ shares. Since many small shareholders simply don’t vote, that will give more power to institutional and activist shareholders who do.

The change has long been sought by large shareholders and activists who want to make it easier to dump underperforming boards. They have been stymied, however, by the “broker vote” standards, which diluted their influence.

Investors such as Carl Icahn have long used proxy fights to put pressure on companies and their managements. By eliminating broker votes, they will have an easier time at winning the voting majority necessary to throw out board members. The changes will be most acute at companies with large mom-and-pop shareholder bases. The rule change won’t apply to instances where an activist runs a competing slate of directors.

This month’s fight over the fate of Bank of America Corp. Chief Executive and Chairman Kenneth Lewis provides a test case for how the changes might affect a board election. In standing for election, Mr. Lewis faces opposition from several large investors, including teachers pension fund TIAA-CREF. A separate proposal would require the bank to split the chairman and CEO roles, effectively stripping Mr. Lewis of at least one of his titles.

Change to Win, a coalition of labor unions opposed to Mr. Lewis’ re-election, predicts that 22% of votes scheduled to be cast at the bank’s shareholders meeting will be “broker votes,” based on trends established during the prior two years. If Mr. Lewis wins just over a third of the remaining votes at the meeting, he would be re-elected, according to the group’s analysis.

“Ken Lewis and other directors may only be elected as a result of the broker vote,” said Michael Garland, director of value strategies at Change to Win’s investment arm.

Mr. Lewis has defended his performance and told board members he intends to remain as CEO at least until the financial crisis is over. The bank has said it doesn’t believe a split of the top roles is the right move. It declined to comment for this article.

The move is the first of what is expected to be a series of changes under way at the SEC. The broker vote change was first proposed in 2006, but it languished under the previous SEC chief and was never finalized.

Reviving the broker vote proposal was one of SEC Chairman Mary Schapiro’s first moves since taking the helm in January. The issue was delegated to the SEC staff to approve and won’t require the five commissioners to weigh in. The SEC is expected to take up other issues to expand shareholders’ rights next month.

Several companies, including General Electric Co., Pfizer Inc., J.P. Morgan Chase & Co. and Exxon Mobil Corp., recently wrote letters to the SEC urging the agency to hold off on eliminating the broker vote rule change until the agency undertakes a broader review of proxy rules.

Some companies say eliminating broker votes will make it harder to establish a quorum at shareholder meetings and require costly efforts to encourage voter turnout. Investors call that a red herring.

Under current rules, investors must instruct their brokers on how to vote at least 10 days before the election.

If there are no instructions, brokers are entitled to vote however they wish on “routine” items. Generally brokers vote for management, on the theory that any shareholder who opposed the company’s position would give instructions. In the U.S., about 80% of investors’ stocks are held at brokerage accounts.

Until now, uncontested director elections have been considered “routine.” The SEC rule change is expected to say that such elections are no longer routine items and brokers can’t vote the stock either way without shareholder instructions.

“This is a huge victory for the investor community,” said Ann Yerger, executive director of the Council for Institutional Investors, a Washington organization that represents pension funds holding $3 trillion in assets.






The Best Ideas

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This month’s issue of Value Investor Insight explores the results of a study conducted by professors at the Harvard Business School and the London School of Economics on the stock returns of professional money managers.


The authors find that the stock that active managers display the most conviction towards tends to outperform the market, as well as the other stocks in those managers’ portfolios, by approximately one to four percent per quarter depending on the benchmark employed. The results for managers’ other high-conviction investments (e.g. top five stocks) are also strong. The other stocks managers hold do not exhibit significant outperformance.


According to the authors, this leads to two conclusions. First, the U.S. stock market does not appear to be efficiently priced, since even the typical active mutual fund manager is able to identify stocks that outperform by economically and statistically large amounts. Second, consistent with the view of several prominent value investors, the organization of the money management industry appears to make it optimal for managers to introduce stocks into their portfolio that are not outperformers. Therefore, investors would benefit if managers held more concentrated portfolios.


The study can be downloaded here.


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We are adding dELiA*s, Inc. to our ValueHuntr Portfolio. DLIA is a company selling for $58M, with 67% of its current assets in the form of cash or cash equivalents. The company’s net current asset value of $47M represents nearly 87% of the total shareholder equity, and it is significantly below our intrinsic value estimate of 115M.


On November 5, 2008, the DLIA completed the sale of its CCS business to Foot Locker. The company received aggregate cash consideration of $103.2 million for the sale of the CCS assets and assumption of certain related liabilities. This transaction significantly strengthened the DLIA’s balance sheet and recapitalized the company at a time when financial flexibility and liquidity is important.


The use of the sale proceeds has not been fully determined, but given the success of recent Delia’s store openings, we expect management to take advantage of retail opportunities within its core Delia’s brand and reduce general administrative expenses.



dELiA*s is a direct marketing and retail company comprised of two lifestyle brands – dELiA*s and Alloy – primarily targeting the approximately 33 million girls and young women that, according to published estimates, are between the ages of 12 and 19, a demographic that is among the fastest growing in the United States. The dELiA*s brand is a collection of apparel, sleepwear, swimwear, roomwear, footwear, outerwear and other accessories. The company currently operates 97 stores across the US, including 13 opened in 2008.





Value of Assets


At yesterday’s closing price of $1.87, the company’s working capital represented nearly 50% of the total shareholder equity. Moreover, the company’s net current asset value of $47M represents 87% of the total market price.


We estimate the company’s assets are valued at $115M, or $3.70/share, with cash representing nearly 45% of the company’s total assets.




The $103M in pre-tax earnings received from the sale of CCS assets increased the company’s equity by 18%, greatly enhancing shareholder value.





Value of Earnings


The P/E ratio of 4 analysts assign to the company is misleading, as it is clear that DLIA’s profitability in 2008 was masked by extraordinary income that would otherwise have caused the company to report a loss as in previous years.


The company was profitable in 2008 only due to the cash received from the discontinued operations of its CCS assets. If this sale is excluded, the company would have recorded a loss of nearly $13M, which is consistent with historical income results. Weinclude the cash received from this sale in our asset valuation, as equity is greatly improved due to the increase in current assets. However, we exclude the profit received from these discontinued operations in our earnings valuation.


In the 10K filed on April 16, 2009, DLIA reported a revenue growth of 7% (including both direct marketing and retail businesses) and an average same store sale growth of 2.8%, even in the challenging economic environment. However, expenses grew by 11%. The direct marketing business accounted for 102M in revenues in 2008, or 47%, while retail accounted for 53% of total revenues.


On average, DLIA has achieved an 8% annualized growth in revenues. However, these higher revenues have been offset by an average annual expense growth of 11%.




SG&A expenses have historically ranged from 61% to 66% of total sales. The company’s COGS have ranged from 42% to 45% of total sales. Our analysis indicates that the company would need to reduce general administrative expenses to 60% of total sales and COGS to 38% of total sales before the company becomes profitable. This means that the company’s management would need to significantly reduce its variable costs before we put a value on its earnings.







We think that DLIA is a case where the sum of its parts is significantly greater than the current value the market is placing on the company. Our analysis indicates that the company could become profitable by reducing its SG&A expenses to 38% of sales and its COGS to 60% of sales over the years. Obviously this estimate is assuming that expenses continue to climb at a similar rate they have historically relative to total sales. We believe this is a conservative estimate, as revenues have the potential to increase at a faster rate after the recession ends and consumers return to their old shopping habits. But because the company is not currently profitable, we rather not take the potential of future earnings into account in our intrinsic value estimate.


We believe the company’s assets are worth at least $115M, or $3.70/share, which is more than double the current market price of $58M, or $1.87/share, and this is placing no premium on the prospects of future earnings and assuming all warrants are exercised.




Disclosure:  The ValueHuntr portfolio does not represent an actual portfolio, and it is tracked for informational and educational purposes only. We do not have an actual holding in DLIA. This is not a recommendation to either buy or sell any securities.

The Renaissance of Value

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There are several documents written by Ben Graham that are currently stored at the New York Research Library, and amongst them is a microfilm document titled “The Renaissance of Value”, written in 1974 by Ben Graham and which I have just obtained for our readers.


The document discusses several questions posed by Graham, one being the following: to what degree should the valuation techniques presented in Graham & Dodd’s Security Analysis be modified to account for recent developments?


According to Graham, the midpoint of the value range has typically been found by applying an appropriate multiplier to estimated future earnings, which is not the best technique to use (This technique is still used today). Instead, the earnings figure taken should be what Graham calls “normal current earnings” and all the future prospects – favorable or unfavorable, specific or general – should enter into the multiplier. This procedural change obviates the necessity of establishing a future value, and then discounting the same to its present worth.


In this document, Graham also corrects some of the formulas he proposed in Security Analysis. For example, Graham had previously suggested that the intrinsic value could be approximated by a formula that employs a single variable G, representing the expected growth rate over the next seven to ten years. The formula read:


Value = “current normal earnings” x (8.5+2G)


However, Graham states that this formula had the great defect of failing to allow for changes in the basic rate of interest. To account for this, Graham re-states his intrinsic value formula as:


Value = “current normal earnings” x (37.5+8.8G)/AAA rate


With the AAA rate at 5.39% today and a historical GNP growth rate of 4%, Graham’s equation indicates that the current multiplier for the market should be 13.5. With operating earnings at $49 for the S&P500, Graham’s formula seems to indicate a fair value of 661 for the S&P500 benchmark relative to its current value of 831. At ValueHuntr, we do not believe in a single formula for valuation estimates, but it is an interesting exercise.


Additionally, it is clear that Graham saw no systematic way of reducing multipliers to allow for investments in companies with a below par debt position. His advice to analysts is to rather avoid attempting a formal valuation of such companies. In other words, analysts should limit their appraisals to enterprises of investment quality.


In general, “Renaissance of Value”, as Graham noted in 1974, involved the reappearance of sub-working capital opportunities. It seems that 2008 was a year which Graham would hail as the “Re-Renaissance of Value”.


A scan of the microfilm document has been posted in our resources section. Click here to read.


Update: GE Reports Q1 Earnings

On Friday, General Electric Co. announced a first-quarter profit substantially lower from last year’s results, dragged down by weak earnings at its embattled finance division. Net income fell 35% to $2.9 billion, or 26 cents per share. GE Capital earned $1.1 billion in the quarter, down 58% from a year ago. The company acknowledged headwinds are facing the division but said it has taken efforts to stabilize the unit and maintained the division is on track to be profitable for the full year. GE reiterated that stress-test results on GE Capital will show the company will not need to raise additional capital, even under the Federal Reserve’s “adverse-case” scenario. GE’s CEO Jeff Immelt reiterated the company’s goal to reduce costs by up to $3 billion for 2009.


At a market price of $12.63, the company is now trading near our $12.68 estimate for intrinsic value in this market environment, as reported on our 3/10/2009 article. However, we believe GE has the potential to consistently grow its intrinsic value through greater earnings power, so we do not see a reason to exit our GE position any time in the near future.

The New Warren Buffetts – Part II

Yesterday we wrote about the 1989 Fortune article titled “The New Warren Buffetts”, which identified the best young investors at the time. The article included the names of what seemed to be unknown and obscured investors at the time.  However, today they are among the best investors around. Investors highlighted in the article included value investing luminary Seth Klarman, hedge fund manager Eddie Lampert, and TV personality Jim Cramer.


Today, we identify the most promising young investors (under 45). This new generation of investors never had a chance to personally meet or study under Ben Graham, but some have been lucky to work with some of Graham’s former students. In other words, the investors we highlight today may be considered Graham’s grandchildren, but they are not necessarily dogmatic Grahamites. Some of them may not even see themselves as value investors, but they do follow two fundamental principles of value investing:


1)     Stocks are not just moving tickers; they are businesses whose fundamentals have an impact in long-term stock performance.

2)     Great investments are those purchased at bargain prices relative to their true worth.


This group is smart and confident enough to ignore short-term market fluctuations for the sake of long-term return. A lot of them already enjoy great success, but for one reason or another they may not be well-known outside the investing circles. Some will fail. But the odds are that, just as those highlighted in the original 1989 Fortune article,  a few will go on to investing fame, and most likely lead their clients to great fortunes. Our picks are:



David Einhorn, 39, Greenlight Capital


Einhorn, a soft-spoken poker guru, is President of Greenlight Capital, a “long-short value-oriented hedge fund”, which he began with $1 million in 1996. Greenlight has historically generated greater than 25% annualized net return for partners and investors. Einhorn is also the Chairman of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company and one of its major shareholders.


He has been a critic of investment-banking practices, saying they are incentivized to maximize employee compensation. He cites the statistic that investment banks pay out 50 percent of revenues as compensation, and higher leverage means more revenues, making this model inherently risky.


In May 2002, Einhorn made a speech about a mid-cap financial company called Allied Capital, and recommended shorting it. The stock opened down 20% the next day. Starting July 2007, Einhorn became a short seller in Lehman stock. He believed that Lehman was under-capitalized, and had massive exposures to CDOs that were not written down properly. He also claimed that they used dubious accounting practices in their financial filings.


In May 2008, Lehman CFO Callan had a private call with Einhorn and his analysts to give Callan a chance to explain discrepancies Einhorn had uncovered between the firm’s latest financial filing and what had been discussed during its conference call about that filing. Ms. Callan is said to have fumbled some of her responses to questions on Lehman’s asset valuations. When Einhorn went public with the conversation, the declining Lehman share price took a further knock and Callan was fired a few weeks later. Lehman went bankrupt in September 2008.

Einhorn is a graduate of Cornell University, where he graduated summa cum laude with a BA in Government. He currently serves on the board of the Michael J. Fox Foundation.


Paul D. Sonkin, 39, Hummingbird Value Funds


Paul D. Sonkin has served as the Chief Investment Officer to Hummingbird Value Fund, L.P., a Delaware limited partnership, since its inception in December 1999. The fund has achieved a 17% annual return since inception. Mr. Sonkin also serves as an adjunct professor at Columbia University Graduate School of Business, where he teaches courses on securities analysis and value investing. From May 1998 to May 1999, Mr. Sonkin was a senior analyst at First Manhattan & Co., a firm that specializes in mid and large cap value investing. From May 1995 to May 1998 Mr. Sonkin was an analyst and portfolio manager at Royce & Associates, which practices small and micro cap value investing.


Mr. Sonkin was the youngest investor profiled in the book “Value Investing: from Graham to Buffett and Beyond” written by his former professor at Columbia Business School Brunce Greenwald.


According to Greenwald, Paul Sonkin isn’t going to impress anyone at cocktail parties by discussing the companies he owns. He would probably impress with his returns, however.


Sonkin finds value in small-caps and micro-caps: companies so small, that value can often be found for one of several reasons:

1) Many funds can’t own them
2) Fewer analysts following the company

Sonkin often indicates that he likes small companies because they are easier to understand. Their business models are far simpler, and thus value can be found without having to understand several lines of business or complex financial statements.


Whitney Tilson, 42, T2 Capital Partners


Whitney Tilson is the founder and Managing Partner of T2 Partners LLC, a $100 million hedge fund based in New York City. Mr. Tilson was one of five investors included in SmartMoney’s Power 30, was named by Institutional Investor as one of 20 Rising Stars. T2 Partners has achieved an annual return of 8.6% since inception, compared to -1.4% for the S&P500 and 1.7% for the Dow. Mr. Tilson received an MBA with High Distinction from the Harvard Business School, where he was elected a Baker Scholar (top 5% of class), and graduated magna cum laude from Harvard College, with a bachelor’s degree in Government.


Prior to launching his investment career in 1999, Mr. Tilson spent five years working with Harvard Business School Professor Michael E. Porter studying the competitiveness of inner cities and inner-city-based companies nationwide. He and Professor Porter founded the Initiative for a Competitive Inner City, of which Mr. Tilson was Executive Director. Mr. Tilson also led the effort to create ICV Partners, a national for-profit private equity fund focused on minority-owned and inner-city businesses that has raised nearly $500 million.Before business school, Mr. Tilson was a founding member of Teach for America, a national teacher corps.


Mr. Tilson is also the co-founder, Chairman and co-Editor-in-Chief of Value Investor Insight an investment newsletter, and is the co-founder and Chairman of the Value Investing Congress a biannual investment conference.



Karen Finerman, 43, Metropolitan Capital Advisors


In 1992, while still in her late 20s, Karen Finerman co-founded hedge fund outfit Metropolitan Capital Advisors. Before launching her hedge fund, she was a lead research analyst for the risk arbitrage department at Donaldson, Lufkin & Jenrette, and before that a trader at First City Capital, a risk arbitrage fund for the Belzberg family.


Metropolitan Capital Advisors is a special-situations, long-short hedge fund which Ms. Finerman assembled with her partner Jeffrey Schwarz. The fund, currently has $400 million in assets and has produced 14% percent annualized returns since its 1992 inception.

Ms. Finerman received a B.S. in Economics, from the University of Pennsylvania’s Wharton School in 1987, with a concentration in Finance. She is the Chairwoman of the Development Committee of the Michael J. Fox Foundation for Parkinson’s Research and serves on its board. She is also a Trustee of the Montefiore Medical Center in the Bronx, N.Y. where she serves on their Investment Committee.


Curtis Jensen, 36, Third Avenue Funds


Alongside Martin Whitman, Curtis Jensen is Co-Chief Investment Officer of Third Avenue Management. He also manages the Third Avenue Small-Cap Value Fund and several sub-advised portfolios. Additionally, Mr. Jensen is Co-Manager of Third Avenue Variable Series Trust.


Mr. Jensen received an M.B.A. from the Yale School of Management, where he studied under Third Avenue Management’s founder, Martin Whitman. He joined Third Avenue Management in 1995. Previously, Mr. Jensen held various corporate finance positions with Manufacturers Hanover Trust Company and Enright & Company, a private investment banking firm.


Jensen’s work at Third Avenue Management takes on a number of roles that have grown as the company has become a major Wall Street investment firm. “The first and probably biggest piece of it is working as an analyst,” he often says. In an interview with the Yale School of management, Mr. Jensen outlined his responsibilities at Third Avenue:



“Whether it’s property-casualty reinsurance, semiconductors, oil and gas, we need to figure out the businesses we’re invested in, or looking to invest in. The second piece would be as a portfolio manager. I manage one of our funds here. So that’s taking those ideas and constructing a portfolio out of the ideas, and managing that portfolio on a day-to-day basis. For us, we tend to be very long-term oriented in our investing. There is no furious buying and selling of securities here”



Since its inception, Third Avenue Management’s returns have been among the highest on Wall Street. The six-year old International Value Fund has earned more than 20% per year, while the flagship Value Fund has averaged more than 16% returns since 1990. Jensen manages the firm’s Third Avenue Small Cap Value Fund, which has consistently outperformed the S&P 500, delivering annualized returns over five years of just over 19% and about 12% per year since the fund was founded in 1997.



Mr. Jensen currently serves on the Board of Opportunities for a Better Tomorrow, a nonprofit organization, which provides academic support, job training and life skills primarily to disadvantaged and at-risk youth.


Thomas S. Gayner, 45, Markel Corporation


Tom Gayner is the Executive Vice President and Chief Investment Officer Of Markel Corp and President, Markel Gayner Asset Management, Inc., the investment subsidiary Of Markel Corp since December of 1990. The asset under management is about $2 billion. Over the last 10 years, Mr. Gayner has averaged an annualized return of 14.3%.


Since 1990, Gayner has served as president of Markel Gayner Asset Management; he also served as a director of Markel Corporation from 1998 to 2003. Previously he had been a certified public accountant at PricewaterhouseCoopers and a vice president of Davenport & Company of Virginia.


As the CIO of Markel Corp, Tom Gayner is certainly a value investor. He thinks stock is part of a business and the business is worth what the present value of the future cash flows are. He often says that his portfolio operates with a Margin of Safety and that he has also relatively concentrated portfolio. As Buffett, he believes that he can earn the best returns by concentrating his focus and portfolio in promising areas where he has the best understanding and knowledge.


Gayner serves on the Board of Directors of The Davis Funds in New York City and First Market Bank and Colfax Corporation, both in Richmond, VA.