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Hunting Down Predators for Big Returns


Fund manager Christian Andreach looks for companies exploiting the weakness of rivals.

Christian Andreach isn't betting on a strong rebound here in the US. But the 36-year-old professional stock picker is wagering on faster growth overseas, a view confirmed by the many C-suite executives he chats with every week.

"They see things getting a little better," says Andreach, a managing director at Manning & Napier Advisors. "Things are stabilizing. That said, those same companies are looking abroad for the next leg of growth."

Andreach agrees. So, along with six other managers and analysts that run Manning & Napier's Equity Series fund (EXEYX), he has placed big bets on companies with large global footprints. The team uses a bottom-up approach that isn't tied to one style: They look at growth, cyclical, and deep-value plays.

The strategy works. Morningstar fund analysts write that EXEYX has produced outsized returns in a variety of buoyant markets, and has also held up better than nearly all its rivals in bear markets.

Through November 9, the five-star fund's 10-year annualized return of 5.95% leads the S&P 500 by 6.39 percentage points, and bests its Morningstar rivals by 8.12 percentage points, placing it in the top 1% of its category.

The no-load fund, with $1 billion in assets, has an expense ratio of 1.05%, and minimum investment of $2,000.

Recently, we caught up with Andreach at his office in Fairport, New York. We talked about his top picks right now, including Google (GOOG), Monsanto (MON), and General Mills (GIS), and why he's steering clear of the banks.

Minyanville: Explain the fund's investment strategy for us.

Christian Andreach: We have three strategies. First, there is the "profile strategy": We look at companies that have strong market positions, good growth prospects, and are selling at reasonable prices. We look to buy a stock when it is trading at around 20% below fair value.

Minyanville: And the second strategy?

Andreach: We employ something we call the "hurdle rate strategy." It's our strategy for investing in cyclical industries. Whenever returns are very high in an industry, competition comes in and that drives returns down below the hurdle rate, the break-even rate of return on investment. We like to invest when industry returns are low and capacity is exiting the business and sell when industry returns are high and capacity is turning into the business.

Minyanville: The final strategy?

Andreach: It's our "bankable deal strategy." This is our deep-value strategy. We estimate a fair value of an enterprise and look to buy it at $0.50 on the dollar. Price becomes its own catalyst. At a certain level, market forces come in and realize the value in the enterprise.
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No positions in stocks mentioned.
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