Fund in Focus: Oppenheimer Mid Cap Fund

O’Hare primarily targets medium-sized companies, which the fund’s literature defines as those with market caps of $2 billion to $11.5 billion. An advantage of mid-cap stocks, O’Hare says, is that they can grow more quickly than large-caps, and nearly as fast as small-caps, yet they are “significantly” less volatile than the latter, and only a bit more volatile than the former.

As typical examples of the kind of companies he invests in, O’Hare cites coffee house chain Starbucks Corp. (SBUX), and natural and organic foods retailer Whole Foods Market (WFMI).

Starbucks is the leader in its business, and its brand name provides a competitive advantage “that is going to be hard to beat,” O’Hare says. The company also features a “great” balance sheet and no debt, he says.

Whole Foods Market has been increasing earnings by 28% and sales by 20% over the last five years, according to O’Hare. He adds that because the company has only about 200 stores in 27 states, it still has room to expand.

The fund’s largest holding is Adobe Systems (ADBE), a software maker whose products include Acrobat, which creates files that are used to distribute documents electronically. “They really own that market,” O’Hare says. “So now it’s becoming the de facto standard for business, personal, and government use.”

Elsewhere in the technology sector, O’Hare has a stake in Symantec Corp. (SYMC), which ranks among the fund’s largest positions. The company, which makes security software, has benefited in recent years as individuals and businesses have sought to protect computer systems against viruses, O’Hare says.

When it comes to selling, O’Hare will unload a company if its financial fundamentals appear to have gone into a decline that will last a long time. For example, he says he disposed of Invitrogen Corp. (IVGN), a biotechnology company, around the middle of this year, because results in two of its key business lines had started to deteriorate.

Although he’ll trim an investment that has started to become pricey, he won’t necessarily eliminate it from the portfolio, O’Hare says. That’s because he’s seen in the past that “great companies tend to grow into their valuations, because they keep doing great things.”

The fund manager says he plans on holding stocks for four to five years, which would translate into a portfolio turnover rate of about 20%. That’s well above the 76% rate chalked up by Oppenheimer Mid Cap over the one-year period through September, however. O’Hare says that’s because he disposed of a lot of stocks when he first joined the fund in order to position the portfolio the way he wanted it. Still, the fund gets a facelift less frequently than its peers, which turned their portfolios over at a 143.9% clip on average.

Contact Bob Keane with questions or comments at: [email protected].