Third Avenue Management, an investment management company based in New York City, released its “Third Avenue Small-Cap Value Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. During the quarter, the fund returned -4.38% compared to -1.06% for the Fund’s most relevant benchmark, the Russell 2000 Value Index. For the year ended 31 December 2024, the fund returned +3.55% compared to +8.05% return for the Index. The fund’s cash holdings were 8% at the end of Q4 as compared to 12.9% as of September 30th, 2024. For more information on the fund’s top picks in 2024, please check its top five holdings.
Third Avenue Small-Cap Value Fund highlighted stocks like Ambac Financial Group, Inc. (NYSE:AMBC) in its Q4 2024 investor letter. Ambac Financial Group, Inc. (NYSE:AMBC) is a financial services holding company. The one-month return of Ambac Financial Group, Inc. (NYSE:AMBC) was 0.78%, and its shares lost 26.05% of their value over the last 52 weeks. On February 4, 2024, Ambac Financial Group, Inc. (NYSE:AMBC) stock closed at $11.50 per share with a market capitalization of $545.596 million.
Third Avenue Small-Cap Value Fund stated the following regarding Ambac Financial Group, Inc. (NYSE:AMBC) in its Q4 2024 investor letter:
“The Fund initiated two new positions during the quarter, OceanFirst Financial (“OCFC”) and Ambac Financial Group, Inc. (NYSE:AMBC).
Ambac Financial Group (“Ambac”) was formerly a business that provided financial guarantees and other insurance policies prior to the Global Financial Crisis. This summer, it announced a transformational deal with Oaktree Capital Management to sell its legacy business for $420 million in cash, and a removal of all material debt encumbrances from the balance sheet.
It is anticipated that the transaction will close in the first quarter of 2025, at which point the business will have been transformed, with the majority of its NAV, in our view, represented by its significant net cash position and a tax-loss carryforward of $1.3 billion that it will seek to monetize. Fund Management’s attraction to Ambac also stems from the attractive, asset-light nature of its other insurance-related operating businesses. While much work remains to be done, we see the potential to build a growing, high-margin operating platform of managing general agents who focus on specialized Excess & Surplus insurance lines. The existing Ambac operating units generate recurring revenue and earnings, based on a percentage of the insurance premium they underwrite on behalf of insurance carriers, an activity which generally does not assume balance sheet risk. We also see optionality for shareholders to benefit from resource conversion activity as the scope of the business grows, offering operating leverage improvements and NAV growth, but also through redeployment of significant net cash and monetization of very large tax assets. Conversion of net cash and tax assets into higher and better uses likely entails further acquisitions of managing general agents and underwriters. Ambac should be able to achieve a significantly higher valuation if it is able to execute on its strategic objectives. These include building its reputation as an asset-light, high-margin insurance operation, rather than as a legacy financial guarantee business, while growing its scale and margins, and converting balance sheet assets into high-quality operating assets.”
An executive signing a contract to symbolize the financial guarantees the company provides.
Ambac Financial Group, Inc. (NYSE:AMBC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Ambac Financial Group, Inc. (NYSE:AMBC) at the end of the third quarter which was 24 in the previous quarter. In the third quarter of 2024, Ambac Financial Group, Inc. (NYSE:AMBC) reported a net loss of $28 million or $0.63 per diluted share compared to net income of 66 million or $1.41 per diluted share in Q3 2023. While we acknowledge the potential of Ambac Financial Group, Inc. (NYSE:AMBC) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.