A fund manager who "eats his own cooking," as brokers like to say, tells you how he thrives during Wall Street's lean times
Managing a mutual fund that's worth $118 million is an enormous responsibility, especially when 2 percent of the fund is my retirement money and my children's college fund. I started the Auxier Focus Fund in 1999 with about $1 million, which was my savings from brokering at Smith Barney. The S&P is up 9 percent since then, but my first 30 investors have nearly doubled their initial investments. I aim to do the same for the 4,000 people who have since entrusted me with their savings.
The returns come from a lifetime of analyzing companies. My training began as an 11-year-old earning $2.50 an hour mowing lawns in Dunthorpe, Oregon. My three most brutal, hill-laden acres belonged to Robert Pamplin Sr., the CEO who transformed Georgia Pacific from a lumber company into an international paper-and-pulp conglomerate. Soon he was mentoring me on the importance of accounting, what he called the language of business. By the time I was a teenager, he had me keeping a ledger at Ross Island Sand & Gravel, one of the companies he owned. I made thousands of entries there, each one helping me better understand the business. I have analyzed ledgers to evaluate companies ever since.
My wife, four children, and I live on a profitable, 108-acre farm where I crunch data rather than let Wall Street hype distract me--another piece of Pamplin's advice. My goal has always been to be a great investor, which isn't necessarily reflected in how much money I manage. I spend 10 to 12 hours a day reading newspapers, company reports, academic studies, and even The Progressive Farmer to isolate companies with strong franchises, consistent earnings growth, and tons of cash. And then I wait--an investing rule I picked up from conversations I had with Warren Buffett. The analysis is only one part of the investment process. The other is temperament. Most people chase speculative bubbles, but it's better to shop for investments when the mood is dour. Then the day-to-day research allows an investor to appraise an asset -better than the rest of the market and have the -conviction to buy when everyone else is screaming "sell." My fund won't always be a top performer--it tends to lag bull runs--but it should outperform in bear markets.
Here's a look at my portfolio and some investment lessons you can apply to your own savings.
Top 10 Holdings Coca-Cola 2.7 percent Altria Group 2.4 percent Travelers Companies 2.4 percent Wal-Mart 2.3 percent Marsh & McLennan 2.1 percent Zimmer Holdings 2.0 percent Telefonos de Mexico 1.9 percent Western Union Co. 1.8 percent Unum Group 1.7 percent Berkshire Hathaway 1.7 percent Fund performance, holdings, and stock prices accurate as of February 29, 2008.
1. Study, don't trade."I trade less than 22 percent of the Auxier Focus Fund each year, compared with the average domestic stock fund's 98 percent. Rather than watch the daily price ticks on CNBC, I read and study trends, businesses, and past prices before I invest. Food inflation has interested me lately, but rather than just buying corn futures, I consulted resources such as the farm daily Capital Press, commodity reports, and even scuttlebutt from local bulldozer mechanics. And then I turned to the stock charts to see which companies flourished when food prices last soared in the 1970s: supermarkets. I bought British grocer Tesco (TSCDY, $23), the best-run supermarket in the world, when it fell to the mid-$20s last summer. I started with a farm report and ended up with a supermarket."
2. The one constant in the market is change. "I've liked Citigroup (C, $23) since the 1980s, but I lost a lot of money on the holding last year because of the blockbuster losses in subprime mortgages. In hindsight, I should have sold in 2003 when former CEO Sandy Weill handed over the reins to Chuck Prince, who resigned in last year's fallout. Weill wasn't infallible, but he was the heart and soul of the company. Lesson learned: Once Costco's CEO Jim Sinegal leaves, I'll probably sell my stake."
