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May 30, 2002 at 08:00 PM
Quick Take: The late 1990s were not kind to money managers like Richard Calvert, who try to ferret out otherwise attractive stocks that have been battered because of short-term difficulties.
These days, however, it’s finally good to be a value investor, said Calvert, who oversees the $671-million AmSouth Mutual Fds:Value Fund/A (AOEQX). Concentrating on undervalued stocks helped the fund gain 4.1% last year and 5.1% the year before, when the Standard & Poor’s 500-Stock Index was off 11.9% and 9.1%.
Through April this year, AmSouth Value lost 0.1%, but that still put it ahead of the S&P 500, which was down 5.8%, and the average large-cap value fund, which was off 2.0%. For the five-year period ended in April, the fund has returned 10.4% annualized, versus 7.5% for its peers.
The Full Interview:
The stocks Richard Calvert invests in tend to be slumping when he buys them.
However, he is willing to discount what he perceives as a temporary setback if he thinks the long-term outlook for a company or industry is bright.
“We try to do our research and look past the current problems and look down the road,” says Calvert, who manages the AmSouth Value fund.
Calvert focuses on stocks that are trading for significantly less than what he thinks the company is worth. He prefers stocks that look inexpensive compared to their history, industry peers, and the market. The 60-75 stocks the fund typically holds consist of large companies and those that have been beaten down into mid-caps.
He also hunts for businesses with strong cash flow and balance sheets, but says he will buy those whose finances look weak, provided they appear to be moving to strengthen them.
Calvert said he began buying energy companies late last year, and more heavily in February. These stocks had suffered during that period because of the Enron debacle and an unusually warm winter that reduced demand for power. As a result, they became “extremely cheap,” according to Calvert, who, nonetheless, sees them as “very attractive” over the long run.
