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February 18, 2004 at 07:00 PM
Quick Take: When the rest of the market has given up on a company, that’s when Jean-Pierre Conreur is likely to buy it, provided he sees what he calls “tremendous recovery potential” in its stock.
In managing the $85 million Tocqueville Small Cap Value Fund (TSCVX), Conreur scans for small companies whose stock is priced low compared to sales. To guard against owning perennial losers, he scans for those with strong balance sheets. He’s partial to companies whose managements own big stakes, and whose shares don’t show up on Wall Street analysts’ radar screens.
Results have been impressive. For the five years ended in December, Tocqueville Small Cap Value gained 19.8% on average, versus 12.3% for the average small-cap value fund. Last year, the fund returned 65.7%, versus 42.3% for its peers. Though the fund has taken on more risk than its peers, exhibiting wider swings in performance, turnover remains lower.
The Full Interview:
Jean-Pierre Conreur’s approach to money management goes a bit against the grain.
Whereas many stock pickers seek companies whose profits are rising, Conreur says he doesn’t even consider earnings. Half the holdings in the Tocqueville Small Cap Value fund that he runs are losing money, he says.
Nor does Conreur worry much about a business’s performance over one quarter or a year. He’s more concerned with its long-term prospects.
“I try to zero in on stocks that have been decimated by the market,” Conreur says. “I always tell my shareholders that I do not make any money, usually, the first year I own a stock,” he adds.
In picking stocks, Conreur looks for those priced low relative to a company’s sales, a ratio he believes provides the best indication of a business’s worth over the long run. He scans for shares whose price-to-sales multiples are near their historical lows over the last five or ten years.
Despite his bias towards deeply undervalued stocks, Conreur won’t go near troubled companies unless he thinks they have the potential to rebound over the next three to five years.
