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March 24, 2004 at 07:00 PM
Quick Take: Unlike some investors, Jamie England likes companies with problems. He believes the management team of Meridian Value Fund (MVALX) is good at finding troubled companies poised for a rebound. England says the team considers companies of all market caps, and in all sectors. Currently, the fund’s median market cap is about $3.5 billion, and its largest sectors are technology, consumer products, and industrial products.
The fund’s team likes to invest in a company before the market recognizes its turnaround potential. However, the team considers troubled companies for some time before actually investing in them. Such caution has helped dampen the fund’s volatility: The portfolio has a three-year standard deviation of 15.05%, versus 17.20% for mid-cap value funds on average. Even with below-average volatility, the fund has a strong long-term record.
Meridian Value has outperformed its peers in eight of the past ten years since its inception. The fund achieved a ten year average annualized return of 19.4%, versus 12.1% for its mid-cap value fund peers. Though Kevin O’Boyle stepped down as manager at the end of 2003, a position he held since 1995, England, who was an analyst on the fund since August 2001, will maintain the investment style under the direction of founder Rick Aster.
The Full Interview:
S&P: What is your basic investment philosophy?
ENGLAND: We look for companies that are having problems and then try to determine what’s causing them. If we feel it is something that can be fixed, we look into investing in the company before it turns around. After the company has a good quarter, the market starts to recognize it.
S&P: Where in the market do you look for turnaround stocks?
ENGLAND: We invest in all industries and in companies of all market capitalizations. Our median market cap it about $3.5 billion, and our holdings range from $600 million to about $20 billion in market cap.
S&P: Would you describe a representative holding?
ENGLAND: A quarter or two ago, we invested in Furniture Brands Intl (FBN), which had problems because the furniture industry was weak. Auto sales were strong, which hurt demand for furniture. Strong home sales, however, created pent-up demand for furniture. Furniture Brands, which was developing a better cost structure, was able to benefit when demand picked up.
S&P: Has the economic rebound made it more difficult to find turnaround situations?
