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THIRD AVENUE FUNDS'
MARTY WHITMAN ET AL.
(continued from preceding page)
Whitman: And anyway, those share issuances are something else that suggests to us that we're talking about very astute managements.
Lie: Again, we picked well financed companies, too, because the industry is cyclical: so if a company doesn't have good finances, it's likely to become a casualty during the down part of the cycle during the tough times - either by going under or falling behind and becoming a non-player.
BUT AT TODAY'S PRICE, IT'S A HECK OF A BUY.
OID: Might you tell us a little bit about C.P. Clare and why its stock has taken such a beating - especially in light of its industry group having done so well?
Whitman: I don't know. But I never have any idea why the market does something. And if I ever think the market knows more about any of our companies than I do, I shouldn't own it - and I wouldn't. What's the market got to do with it? Feel free to quote me on that.
OID: The last time we asked you something like that, you said it was like asking you to understand abnormal psychology.
Whitman: Exactly. Who knows about the market?
OID: If it's abnormal psychology, I feel very qualified...
Jensen: C.P. Clare has gotten hammered particularly bad recently. But we don't know why. But if you're asking if there's anything at a company level that makes it less attractive than any other company in this area, I don't know of anything. I just think it's a heck of a buy.
OID: Then let's go straight to the ultra-sophisticated fundamental analysis: How does C.P. Clare stack up in terms of business lines and all that techno-stuff?
Jensen: First of all, we tend to lump C.P. Clare in with the semiconductor equipment companies. But it really isn't an equipment vendor. It's a manufacturer with two segments: The first is analog and mixed signal semiconductors. And the second is discrete components like relays and switches and magnetic components for modems, transformers, etc. And those two segments each account for roughly half of their revenues.
We lump it in with the equipment companies because its fortunes are also tied to the semiconductor cycle.
Whitman: Yeah. We lump Electro Scientific and AVX in with them, too. AVX isn't an equipment company either. It's an electronics company - it makes capacitors - which are basically used in almost every type of electrical device.
Lie: The fortunes of one may lag or lead the other at different points in time, but they're clearly related.
Jensen: We expect C.P. Clare to exit the second segment - the relay and switch side of the business - and reinvest that capital on the semiconductor side. They think their competency is based on the semiconductor side - where they think there are better growth opportunities.
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