Quick Take: The investment style of the managers of the Cambiar Opportunity Fund (CAMOX) can be summed up simply.
“We’re trying to buy stocks when they’re cheap, and sell them when they’re not,” says Brian Barish, who leads the team that has run the fund since it started in the summer of 1998.
More specifically, the managers look for companies with long-term growth potential whose shares seem attractively priced compared to their history or their competitors. The team focuses the portfolio on about 40 large-cap stocks.
Their approach to investing has kept the fund in the black almost every year it’s been in operation, and ahead of its competition over the short and long run.
Cambiar Opportunity returned 2.8% through April, versus a gain of 0.4% for the average large-cap value fund. For the five years ended in April, the fund climbed an average annualized 10.1%, versus a gain of 1.2% for its peers. Over the past three years, the portfolio has taken on about the same amount of volatility as its peers.
The Full Interview:
Before screening for the undervalued stocks they prize, the managers of the Cambiar Opportunity Fund identify industries with qualities they believe will enable a company to generate solid returns over the long term, regardless of how the economy is doing.
Next, they look at stock prices relative to a business’s earnings, book value and cash flow, scanning for multiples that are inexpensive compared to the shares’ history or the company’s peers. In addition, they like to see sound balance sheets.
About 40 large companies make their way into the $100 million fund. “We believe, philosophically, in having a few eggs in the basket and watching it closely,” lead manager Brian Barish says of the portfolio. Not many stocks have the characteristics his team prizes, and if it added more it would wind up with “a lot of dinky positions,” he says.
A stock that’s typical of the kind the managers lean towards, Barish says, is toy maker Mattel, Inc (MAT), which the fund began buying in the first quarter this year.
Mattel is changing from a growing company into one that generates “steady cash flow,” as many of its products have become “extremely mature,” the fund manager says.
The stock has come under pressure because of investor worry that Mattel’s Barbie dolls have been losing market share to competitors, says Barish, who does not share those concerns. Mattel has been expanding its Barbie line, which he feels is “very capable” of rebounding. The company also continues to enjoy healthy sales overseas, he says. As a result, Barish believes the company’s top and bottom lines, and its stock’s valuation, will all move higher.
Another stock that entered the fund in the first three months of 2004 is Viacom Inc`B` (VIA.B). The media and entertainment company has been hurt lately, Barish says, partly because investors feared it would make an unwise acquisition in response to the potential combination of Comcast`A`Spl(non-vtg) (CMCSK) and Disney (Walt) Co (DIS). That deal never materialized, though, and Barish says he never expected Viacom to move to match Comcast.
Relatively slow sales growth in Viacom’s radio business has also kept a lid on the stock, Barish says. But he’s not alarmed by the revenues.
Barish says he is drawn to Viacom, which is one of the fund’s biggest holdings, because of its network and cable TV units, like CBS and MTV. “They’re very dominant in just about every category that they’re in broadcast television,” Barish says.