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June 30, 2003 at 08:00 PM
Quick Take: Like many value investors, Laura Sloate, manager of Strong Value Fund (STVAX), is willing to take contrarian positions by holding stocks suffering setbacks or investing in industries facing difficulties. She cites Schlumberger Ltd. (SLB), which made a “dumb” acquisition, and real estate investment trusts (REITs), which have been “depressed,” as examples.
Sloate also speaks her mind about broader issues facing the markets and corporate America. She’s concerned about the large amounts of capital in derivatives, and feels that some corporate boards are dominated by the “buddies” of the CEO. Taking the long view, however, the manager notes that “every market cycle … has its share of criminals.”
Over the long term, Strong Value has held up better than most large-cap value funds by rising an annualized 1.6% for the five-year period through May, versus a 0.1% gain for its peers. More recently, the fund has modestly trailed its counterparts by returning 9.5% this year through last month, while its peers were up 9.8%.
The Full Interview:
S&P: What is your basic investment philosophy?
SLOATE: I focus more on individual stocks than sectors. The fund is targeted to the Russell 1000 Value Index, but we aren’t shadow indexers. I look for with stocks with attractive fundamentals and prices. The entry price for a stock is the most important criterion. We generally look for companies with some sort of catalyst, such as a new product, restructuring, or acquisition.
S&P: Would you give an example?
SLOATE: Schlumberger Ltd. (SLB) is a turnaround story of a great company that made a very dumb acquisition of a dot.com. They’ll probably get ten cents on the dollar from that investment, but they’re now refocusing on their strengths in oil services.
S&P: Do you consider any top-down trends?
SLOATE: I’m in the camp that believes consumers are going to be spending more. Outside of buying autos and housing, consumers haven’t spent much money for the past two years. As a result, consumer spending is likely to rise, especially if the unemployment rates goes down to 5%. Our consumer picks include McDonald`s Corp. (MCD), Sony Corp. ADR (SNE), Warnaco Group`A` (WRNC), and Tiffany & Co. (TIF).
S&P: Your cash position ranged from 25% to 30% earlier in this year. Was that stance based on any top-down considerations?
SLOATE: I am willing to make a cash bet. A lot of funds perform badly when managers are forced to be fully invested when they shouldn’t be. Our objective is to make money for our shareholders.
