LORD ABBETT MID-CAP VALUE
With all the volatility in the market place, it's not surprising to find value funds doing well. After all, bargain hunting in times of uncertainty can make good sense ----particularly if you're an old pro at it.
The Lord Abbett family of funds has roots that date back to 1929. And throughout the decades, it's a value investing discipline that has underscored their investment philosophy.
Ed von der Linde, is the portfolio manager of Lord Abbett's Mid-Cap Value fund. Although the fund has been around since 1983, von der has been its portfolio manager since 1995. When perusing companies to invest in, one of the first places he and his team of four look is the company's balance sheet.
"What we want to see first off is how healthy the balance sheet is, " says von der Linde, who's Mid-Cap Value fund was up nearly 37 percent as of Nov, 29 . "We want to see that nothing on it goes contrary to our belief that assets should generate a return."
Another must-read are the footnotes. By reading them, von der Linde says lots of obscure things about a company can be learned. Things that could be overlooked if one didn't read the smaller print.
Currently this Mid-Cap Value fund has 52 stocks in its portfolio. Here's more about it from von der Linde:
Q:Is there a cycle to value investing?
von der Linde: I would say value investing is sort of like the tortoise and the hare. We're always going. We're always moving forward and very rarely do we do what the hare did which is take a nap because we're so far ahead.
Q: Why do you think investors haven't looked much at value funds lately?
von der Linde: There are no champions for value anymore so value is not something a lot of people have been pursuing. A lot of folks who used to proselytize the value methodology have left the business. They made their reputations in the 1970s and '80s. And rather than fight the battle that we fought in 1998 and 1999, have retired.
Q: Do you think that value investing can keep performing well into next year?
von der Linde: The positive cycle for value investing could last for years because the market is broadening out instead of narrowing into a handful of stocks that dominate it.
For instance, in 1999, there were more than 2-to-1 declining stocks on the New York Stock Exchange than gaining stocks. In other words, most stocks were negative last year. This year, we actually have greater than 2-to- 1 advancing stocks. That means that the average stock is actually doing okay this year. But because the S & P 500 and the NASDAQ are dominated by high tech, media and telecoms, people don't necessarily see it.
Q: What's driving the performance of your fund?
von der Linde: Basically what's driving performance this year is the stocks that we look at got so cheap, investors realized that and started buying. Or, companies came in and bought the companies that make up our portfolio because they were so cheap. Those things tend to happen at the bottom of a cycle.
Q: Can you give me the names of a couple of different companies that have worked well in the portfolio and some that haven't?
von der Linde: Caremark Rx has done really well for us. We bought it originally three years ago, the company had had a change in management which we saw as a primary catalyst. Since the new management has taken over, they've refocused their business and the stock has performed nicely.
Another is St. Jude Medical, they make pacemakers and heart values. Once again, there was a management change and new product introduction.
One that didn't work out was Safety-Kleen. We bought it around $13 dollars a share; they had merged with another company; the stock ran up to $15 and then came down and when it drifted down further, got out of it.
|FUND:||Lord Abbett Mid-Cap Value Fund|
|PERFORMANCE:||Year-to-date through Nov. 29, up 36. 28 percent. In 1999, the fund's total return was 4.23 percent; in 1998, down 0.45 percent; and in 1997, up 31.53 percent.|
|TOP HOLDINGS (as of 10/31/00):||Caremark Rx; CBRL Group; J.C. Penny; Oxford Health; and Teco Energy.|
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