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Finding Winners Where No One Else Will Go


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

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.
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