Leading Mid-Cap Managers Name 10 Favorites
biz.yahoo.com Tuesday March 4, 7:00 am ET By Christopher Davis
We've been talking to a lot of value-oriented mid-cap fund managers lately, and their picks run the gamut, ranging from utility and retail stocks to beaten-down blue chips and retailers. Below is a roundup of some of the names that have emerged in recent conversations with stock-pickers.
Dave Wallack, T. Rowe Price Mid-Cap Value (Nasdaq:TRMCX - News) Although he hasn't been at the helm of this offering for long, Dave Wallack has executed his bargain-hunting style with aplomb. He bought beaten-down financials and media names such as SAFECO (NasdaqNM:SAFC - News) and Washington Post (NYSE:WPO - News) in 2001, in time for their rallies in 2002. More recently, Wallack has lightened his stakes in those names while adding electric utilities FirstEnergy (NYSE:FE - News) and TXU (NYSE:TXU - News), which he says were unfairly painted with the same brush as Enron (Other OTC:ENRNQ.PK - News) and other highly-leveraged energy traders. And he boosted his weighting in oil producer Amerada Hess (NYSE:AHC - News) after it slumped amid worries over its ties with politically volatile Venezuela and disappointing exploration results in Africa. Wallack says the company trades at a large discount to its private market value, though, and stands to benefit from higher oil prices. He also initiated a position in telecom-equipment maker Tellabs (NasdaqNM:TLAB - News). He says the company is reasonably priced, boasts a solid balance sheet, and is the dominant equipment provider to Baby Bells such as SBC (NYSE:SBC - News) and Verizon (NYSE:VZ - News), the survivors of the telecom wreck.
John Rogers, Ariel Appreciation (Nasdaq:CAAPX - News) John Rogers recently took charge of this fund, but his long and successful record at Ariel Fund (Nasdaq:ARGFX - News) suggests that paying attention to his picks can be worthwhile. He seeks out companies trading at a 40% discount to their intrinsic values and favors firms in consistent and stable industries with high barriers to entry. In 2002's fourth quarter, high-end retailer Tiffany (NYSE:TIF - News) met his standards on a number of fronts. For one, its brand name is renowned, so much so that it devotes a far smaller percentage of sales to advertising than other luxury retailers. Second, Rogers contends it is a high-quality business. Tiffany's classic designs have a shelf life of 20 to 30 years, which enables it to adhere to a strict policy of never putting merchandise on sale. Management is also seasoned and has a strong record of boosting margins and maintaining high returns on capital. The stock is down thanks to slumping sales in Japan, but Rogers thinks the dip is temporary and provides an opportunity for long-term investors.
Bob Olstein, Olstein Financial Alert (Nasdaq:OFALX - News) It's taken the collapse of Enron and WorldCom to get investors to appreciate the virtues of conservative accounting, but Bob Olstein has insisted on clean balance sheets all along. He also requires his picks to trade at a 30% discount to their intrinsic values and doesn't necessarily limit himself to mid-caps in his quest for bargains. In recent months, for example, Olstein and his team picked up Home Depot (NYSE:HD - News) and McDonald's (NYSE:MCD - News), arguing these battered blue chips can fix their operational problems and reward cash-flow-hungry investors. They've also found opportunities in select technology stocks lately. Fairchild Semiconductor (NYSE:FCS - News) and International Rectifier (NYSE:IRF - News) have been among their favorites because they expect the companies to profit from increased demand for power chips. The managers also picked up Tyco (NYSE:TYC - News) in December, believing the company's new management and new auditors have it headed down a prudent path. They scooped up shares of the industrial conglomerate at around $15 and peg their worth in the low $20s.
This article is intended to feature the viewpoints of individual fund managers. The opinions expressed are not necessarily those of Morningstar, and investors should not consider the stocks mentioned above as recommendations from Morningstar analysts.
Christopher Davis is an analyst with Morningstar.com. While he welcomes your email, he cannot answer financial planning questions. He can be reached at christopher.davis@morningstar.com.