Q&A: Croft Value Fund Seeks 'Unique Ideas'

Kent Croft

Cisco's on the list.
Telecom is an area where we see some pretty powerful three-to-five-year trends. We've owned Cisco, Amdocs, and Corning. We think earnings growth is really going to start to pick up given underinvestment in capacity in broadband over the past six years. We had too much fiber for a while and might still have a bit too much. But we're catching up very quickly and need more capacity for high-def and video. The bandwidth usage is just unbelievable. Cisco's at the heart of all that globally. It's different for a value investor maybe, but the valuations are very compelling. It's being impacted by the economy right now, but even after a couple of bad quarters, its stock has held up. It's been a hell of a lot better than owning a bank or something.

How about one of those contrarian picks?
One everybody hates right now is Weyerhaeuser, the timber company. We like it for the timber assets to be realized over time. If you take those assets and add in their other businesses, we think it's worth $100 [a share]. [It trades in the mid-60s now.] They haven't done anything for the last year or two. These companies lend themselves to very long-term investors. If I had any money to put in the grandkid's name, I'd put some in timber.

Got any advice for retail investors?
The retail [investor] herd has historically been one of the biggest counterindicators of performance. The important thing is steeling yourself to resist cocktail party talk about the hottest stock. It's the hardest thing to do, but it can be one of the most rewarding.