FPA Capital Understands:

The title says it all. FPA Capital's 2006 annual report highlights many of the points this blog has been making for some time. The market is underpricing the risks of credit contraction and it's fallout on the economy and market valuations. As a result Mr. Rodriguez has 39% of his fund's assets sitting in cash. In addition, Rodriguez mentions one new investment holding in Atwood Oceanics (ATW). The thesis, which he spells out in the report, focuses on the fact that Atwood is trading at 70% of replacement value and 11 times earnings, making it a great example of true marginal company investing. I plan on analyzing more on FPA Capital and its holdings.