Portfolio Manager Perspectives

Jeff Benjamin

Bargain pricing has these two companies on Wilmington growth fund's ‘buy' list

Market is ignoring fundamentals of coal producer and broadcaster

Mar 15, 2012 @ 12:54 pm

By Jeff Benjamin

Investors might be overthinking the impact of the warm winter and lower natural gas prices in their shunning of certain coal industry companies, according to Mark Schultz, manager of the Wilmington Mid Cap Growth Fund Ticker:(AMCRX).

Specifically, Mr. Schultz has taken a contrarian liking to Joy Global Inc. Ticker:(JOY), a mining equipment provider for the coal-mining industry.

“The Central Appalachian coal producers have been cutting production, but I think investors are getting a little shortsighted with a company like Joy,” he said.

The stock is trading below $79 a share and is still up 5% from the start of the year after falling nearly 18% from more than $95 in early February.

“There is nothing fundamentally wrong with the company,” Mr. Schultz said. “Plus they have a strong and growing position in China.”

Contrarian investing is not necessarily Mr. Schultz's primary focus, but through his bottom-up stock-picking strategy, he is always looking for solid companies that the market is undervaluing.

In the category of stocks he likes along with the market, there is CBS Corp. Ticker:(CBS).

The stock is up more than 16% from the start of the year, which compares with a 10.9% gain by the S&P 500 over the same period.

In a crowded and competitive media marketplace, Mr. Schultz likes the way CBS has been able to improve on its ability to generate revenue from content via cable television and the Internet.

“The company is also benefitting from a recent upturn in ad spending, and it doesn't hurt that there is a lot of political ad spending right now,” he said.

CBS, with a $20.5 billion market cap, is beyond the normal range of between $2 billion and $15 billion, where Mr. Schultz usually invests for the midcap fund.

“It's our intention to hold a stock while the strength in the business model that we've identified continues to develop,” he said.

The portfolio, which comprises 70 stocks, has a weighted average market cap of $8.6 billion, which compares with $8.7 billion for the benchmark Russell Midcap Growth Index.

While Mr. Schultz practices a fundamental research methodology, it is generally tilted toward anticipated growth, with overweightings in consumer discretionary, energy, technology, financial services and industrials.

So far this year, the fund is up 14.9%, which compares with a 13.9% average gain for the midcap-growth fund category as tracked by Morningstar Inc.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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