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From the Value Seat, the View Looks Good


How one young fund manager survived the crash and lived to tell about it.

The market meltdown of 2008 had many consequences for Connor Browne, the 30-year-old co-manager of Thornburg Value (TVAFX), both professional and personal, but none more so than on his teeth.

After suffering through that brutal market downturn, Browne visited his local dentist, who was shocked by what he saw. The wear and tear on the investment pro's choppers amazed him. In fact, he said he had never seen such wear on a person of Browne's young age.

"He was flabbergasted," Browne says. "I told him that, well, 2008 would do that to you."

Fortunately for Browne, and his dental health, 2009 has so far proven a much better year. In fact, Morningstar just recently highlighted the Thornburg team as early contenders for domestic stock-managers of the year. The fund enjoyed a strong performance during the second-quarter, returning 30.04%, ahead of the S&P 500 Index return of 15.93%.

Browne, along with veteran stock pickers Bill Fries and Edward Maran, employs a distinctive strategy: Holdings are divided into three categories including basic value, consistent earners, and emerging franchises. The strategy works, as Thornburg boasts superior three-, five-, and ten-year returns.

Through September 16, the fund's ten-year annualized return of 3.18% leads the S&P 500 by 3.5 percentage points, and bests 90% of its Morningstar peers.

Thornburg Value, which comes with a 4.5% front-end load, requires a minimum $5,000 investment.

Minyanville checked in with Browne recently at his office in Santa Fe, New Mexico to discuss the fund's strategy and where he's spotting opportunity right now.

Minyanville: Explain your investment strategy for us. What do you look for in a stock?

Browne: We are bottom up, fundamental stock-pickers. To us, if you are going to really know the name you're investing in, then it makes sense to have a focused portfolio. Relative to many of our peers, we have a low number of holdings. Also, in each and every company, we look for promise and discount. So, even in very cheap, basic value stocks, it isn't just discount we focus on. We need to see that path to success.

Minyanville: Have you adjusted your strategy at all in response to this wild market? Any tweaks to the process?

As we faced a real credit freeze, it became very important to figure out what sort of debt companies had due. Previously, we might have assumed it would be easy for a company that was reasonably well-capitalized to roll debt as it matures and comes due. But that was no longer a given. So there were adjustments in our individual company research and risk control across the portfolio that we had to make in response to the environment. But, by and large, we stuck to our discipline and investment approach. We made investments in tough times when no one was buying equities, much less the stuff we were buying at the time. And that worked out well for us.
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No positions in stocks mentioned.
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