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February 18, 2004 at 07:00 PM
Quick Take: To outperform the market, James Oelschlager believes the best strategy is to stick with stocks with the highest long-term growth prospects. Following this strategy, he runs White Oak Growth Fund (WOGSX) with a concentrated, low-turnover approach. As of December 31, the fund had just 20 holdings and a turnover rate of 10.8%.
Oelschlager picks stocks of companies with high earnings growth and attractive valuations. Sticking with high-growth helps the fund avoid style drift. Returns-based style analysis for the fund shows it has been consistently growth oriented the past three years.
Over the long term, White Oak Growth Fund has generated well above-average returns compared to its peers. For the ten-year period through December 31, the portfolio rose an annualized 12.4%, versus 8.1% for the average large-cap growth fund.
The aggressive style and steadfast growth orientation, however, has exposed the fund to the market’s steep changes in recent years. As a result, the offering has high volatility relative to its peers. For the three years ended in December, the fund fell 17.7% on average, versus a 9.9% loss for the average large-cap growth fund.
The fact that the fund can outperform in bull markets, but suffer badly in bear markets, means investors should be prepared to ride out ups and downs. Last year, the first year of the current bull market, the fund shot up 52.6%, versus 28.5% for its peers. In 2002, the worst year of the recent bear market, it plunged 40.0%, while its peers lost 27.9%.
The Full Interview:
S&P: What are the fund’s investment goals?
OELSCHLAGER: Our goal is to outperform the market. We think the best way to do that is to run a concentrated portfolio with very low turnover.
We build the portfolio by first looking for the right sectors. We then look at earnings growth rates, valuations, and how a stock is trading relative to its peers. We like conservative managements with low debt.
S&P: When will you make changes in the portfolio?
OELSCHLAGER: We change our sector positions every few years, and we change our individual stock holdings very infrequently. We just went through an ugly down market, when a lot of our peers had style drift. We didn’t change our style, which has helped us.
S&P: Would you mention a recent change in the fund?
