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Third Avenue Management says Washington Trust (WASH) has Consistent Profitability & Strong Returns

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Third Avenue Management, a disciplined, value-oriented asset manager and investment fund, published its ‘Small-Cap Value Fund’ third-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 11.41% was recorded by the fund for the 3rd Quarter of 2020, below its Russell 2000 Value benchmark that returned 18.91%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Third Avenue Management in their Small-Cap Value Fund’s Q3 2020 Investor Letter said that they've reached their buy signal in Washington Trust Bancorp, Inc. (NASDAQ: WASH) and so they initiated a position in the company. Washington Trust Bancorp, Inc. is a bank holding company that currently has an $814 million market cap. For the past 3 months, Washington Trust Bancorp, Inc. delivered a 41.88% return and settled at $47.16 per share at the closing of January 15th.

Here is what Third Avenue Management has to say about Washington Trust Bancorp, Inc. in their Investor Letter:

"After multiple years of patiently monitoring another bank, Washington Trust Bancorp (“Washington Trust”), its shares finally reached our buy price.

Washington Trust is a high-quality commercial and retail bank that we’ve followed for years. The bank operates in the Northeast with a footprint spread across Rhode Island, Connecticut, and Massachusetts. Washington Trust boasts a rich history—it was founded in 1800 and holds the impressive distinction of being the nation’s oldest community bank. The bank has not only demonstrated an aptitude for navigating countless economic cycles but has also flourished and compounded shareholder value along the way. We believe the bank is well-positioned to continue doing so over the long term as well and is a great addition to the Fund’s compounder bucket. Although Washington Trust enjoys one of the top market shares in its core state of Rhode Island, its share of the market is still in the single digits, leaving significant opportunities for continued gains. Moreover, the bank’s expansion within Connecticut and Massachusetts is still relatively nascent, representing even larger growth opportunities. Additionally, Washington Trust operates a valuable wealth management business, unusually large for a bank of its size, helping it generate an outsized portion of its profits from fee income.

Beyond Washington Trust’s outlook for growth, we would highlight the bank’s extraordinary track record and high quality management team, whom we first met two years ago. Over the years, Washington Trust has proven itself to be a conservative institution, always maintaining a strong balance sheet and best-in-class financial metrics, including consistent profitability, strong returns, and pristine asset quality. This has resulted in the company compounding value at exceptional rates over the long term—at mid-teen percentages on an annualized basis. Given all this, the chance to purchase the bank at a significant discount to our estimate of intrinsic value was quite compelling. To put the valuation opportunity in perspective, we were able to initiate the investment in this quality franchise at a dividend yield of seven percent despite a payout ratio only around fifty percent."

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Last December 2020, we published an article telling that Washington Trust Bancorp, Inc. (NASDAQ: WASH) was in 11 hedge funds’ portfolio, almost making to its all time high statistics of 12. WASH delivered a 5.27% return YTD.

As of September 2020, Third Avenue Management had a 167K share position in WASH that amounted to $5 million. This made Third Avenue Management as the top 2 hedge fund that holds most of WASH’s stake, just behind Renaissance Technologies with $8 million worth of WASH shares. However, our calculations showed that Washington Trust Bancorp, Inc. (NASDAQ: WASH) does not belong to the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.

Disclosure: None. This article is originally published at Insider Monkey.