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Finding Winners Where No One Else Will Go

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Inside a multi-cap value portfolio with stellar long-term results.

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At Croft-Leominster, making money for clients is a family affair.

The Baltimore-based money management firm was founded in 1989 by Gordon Croft, a veteran T. Rowe Price (TROW) analyst and fund manager, and his son, Kent. Another son, Russell, joined the firm in 1998. The shop now has $650 million in assets under management.

Russell Croft, 35, tells us that much of what he learned as a professional investor didn't come from studying for his MBA or working for other money managers. Instead, he says he owes a big debt to his dad.

"I've learned a ton from him, especially about how to invest like a contrarian," he tells us. "He has taught me how to stick your nose in places where no one else wants to go. From him, I learned how to take a stand when others have given up on companies."

Croft, along with his dad and older brother, runs the Croft Value Fund (CLVFX), a small fund that continues to make a big impact. They use a bottom-up approach to hunt for shunned stocks of different market capitalization across various industries selling at depressed prices.

The go-anywhere approach works.

Through December 2, the fund's 10-year annualized return of 5.11% leads the S&P 500 by 5.70 percentage points and bests its Morningstar rivals by 5.87 percentage points, placing it in the top 5% of its category.

Morningstar awards the fund five stars, its highest rating. The no-load fund, with $140 million in assets, has an expense ratio of 1.46%, and requires a minimum investment of $2,000.

Recently, we chatted with the youngest Croft, who walked us through the team's investment strategy and its top picks right now -- like Valmont Industries (VMI), Foster Wheeler (FWLT), and Freeport-McMoRan Copper & Gold (FCX).

Minyanville: Where do you find investment ideas?

Russell Croft: We are all generalists here and we're very flexible in where we look for opportunities. We want to find good, long-term investments. So we get research from Wall Street, independent providers, and a network of deep thinkers we trade ideas with. That is where we get our idea flow. Then, of course, you have to start to cut all that data down.

Minyanville: How do you do that?

Croft: For us, it's all about valuation. This is where we take our first slash at choosing companies. We look for contrarian ideas, the out-of-favor, beaten-down stuff. We look to the names that Wall Street has given up on. You can make good money when people run the other way.

Minyanville: What else do you look for?

Croft: We also look at names with catalysts, where we think a driver is being missed by the market. Thirdly, we like companies that are too cheap compared to their growth rates.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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