Quick Take: When it’s pointed out to portfolio manager Jonathan Simon that his fund finished 2002 in the black, he responds: “Just.” Still, a ball that scrapes the back of the outfield wall on the way down is a home run.
The JPMorgan Mid Cap Value Fund/I (FLMVX) that Simon pilots returned only 3.2% last year. But that put it ahead of the average U.S. stock fund, which fell 23%, and its peer mid-cap value funds, which were off 14%. A retail version of the institutional fund has been available since April 2001.
Simon looks for undervalued stocks of medium-sized companies, which the fund’s literature defines as those with market caps of $1 billion to $20 billion. He concentrates on businesses with robust returns on invested capital, strong free cash flow, and low debt. The portfolio has been ranked 5 Stars by Standard & Poor’s since November 2000.
The Full Interview:
While most domestic equity funds posted losses last year the JP Morgan Mid Cap Value Fund eked out a gain. What went right?
Jonathan Simon, who oversees the portfolio, says newspaper publishers like Washington Post`B` (WPO) helped. The company’s stock rose about 40%, making it one of his best performers.
A long-time holding in the fund, Simon was originally drawn to the company because of the strengths of its businesses and its management’s strategy.
In addition to the Washington Post, which dominates its local market and has a national readership, the company owns six network-affiliated television stations. Both units, Simon explains, generate lots of cash that management has used to expand the company, investing in cable television systems and in assets to supplement its Kaplan Inc. educational services subsidiary.
“We like the fact that this is a company that was managed for the long term, that was not managing quarterly earnings,” Simon says. Because of the stock’s recent rise, however, Simon adds that he has cut his position in half to 1.5% of the fund’s assets.
Elsewhere in the publishing and broadcasting field, Simon owns Scripps(E.W.)`A` (SSP), which climbed about 16% in 2002, and Gannett Co (GCI), which gained 10%.