Funds for the Long Haul
These managers have stood the test of time for their investors
Eveillard says that some of the battered leaders of the '90s bull market are now priced at an attractive level. Last year, he started buying shares of beaten-down media companies, Liberty Media in the U.S. and Vivendi in France. He also started buying the stock and bonds of Tyco International, whose former CEO Dennis Kozlowski has become a symbol of corporate malfeasance. Whatever one thinks of Kozlowski, "he bought what we think are real businesses," says Eveillard. Overall, he pegs Tyco's value at just over $20 a share, so he started buying the stock when it fell below that threshold, at an average cost of between $14 and $15. Since then, the stock has climbed to about $17. He also has been buying some battered telecom bonds, including the debt of Level 3 Communications and Lucent. As for telecom stocks, it may be a while before Eveillard is willing to buy. But that's OK. If there's nothing to catch in the telecom stock pond, this Frenchman is more than willing to fish elsewhere. -Paul J. Lim
STRATTON GROWTH
MANAGER'S BEST YEAR: 1976; up 39.8%
MANAGER'S WORST YEAR: 1973; down 23.5%
Despite delivering enviable returns of nearly 11 percent a year for the past 30 years, Jim Stratton' s Stratton Growth has only $38 million in assets. To put this into perspective, the Pimco Total Return Fund raked in more than $1 billion in October alone. But Stratton, 66, a soft-spoken man who comes across as more Kris Kringle than Gordon Gekko, the Machiavellian capitalist portrayed by Michael Douglas in the film Wall Street, isn't as concerned about attracting assets to his fund as he is about managing them. He lacks a single marketing person at his small suburban Philadelphia investment firm, which makes most of its money the old-fashioned way: managing accounts for institutions and high-net-worth individuals.
That suits shareholders of Stratton Growth just fine. Stratton's fund, with a low minimum investment of $2,000, has delivered positive annual returns of about 2 percent on average at a time when the overall market has been down about 12 percent annually. Over the past decade, the fund has come up with average annual returns of 10 percent, outpacing the S&P 500. While the typical fund constantly buys and sells its holdings, Stratton will hold on to some stocks, like office equipment maker Pitney Bowes, for five years or more while waiting for them to fulfill his expectations.
Patience is something with which Stratton is all too familiar. He launched Stratton Growth in 1972, and the first three months of the fund's existence went smashingly, with total returns of 14 percent. Then the 1973-74 bear market struck, leading to a decade of absolutely no growth for the S&P 500. Nonetheless, Stratton has found a way to make money for his investors in 22 of the past 28 years.
As for today's market, "do I think we're close to entering a new bull market? Absolutely not," he says. The sawtooth pattern of stock prices rising and falling, then rising and falling again, "will be with us for a long time," he says, as investors unwind the market mania of the '90s. The technology and telecom sectors must still deal with overcapacity. The way to make money nowadays, he believes, is to look for "fallen angels," strong leaders in their industries whose share prices have temporarily slumped. These are companies like healthcare firm Baxter International, whose shares have been cut in half and now trade at a price/earnings ratio of about 15. And he's not afraid of the occasional technology stock: After Hewlett-Packard shares fell from nearly $70 two and a half years ago to below $20 late last year, Stratton found it attractive, especially with evidence that the company's merger with Compaq is going better than expected. "I would love to find another three or more Hewletts," he says. Right now, he's deciding whether to buy shares of another former leader of the '90s bull market that has fallen on hard times: Home Depot. -P.J.L.
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