Quick Take: While many money managers try to forecast what they can gain from an investment, J. Jeffrey Auxier, who runs the Auxier Focus Fund (AUXFX), first tries to determine what he might lose.
In picking stocks and bonds for the fund, which currently has a quarter of its assets in fixed-income investments, Auxier focuses on companies he deems essentially sound, but whose securities are temporarily undervalued because of a short-term problem.
Given his approach to investing, Auxier says he expects the four-year-old fund to perform better in a market that's falling than one that's rising. The Auxier Focus Fund's returns don't contradict him.
The Auxier Focus fund gained 1.9% for the three years ended in January, compared with losses of 13.8% for the S&P 500 and 6% for the average large-cap value. The fund was down 10.4% for the one-year period through February, while the index was off 22.7%.
The Full Interview:
With the market in the throes of a three-year downturn, you might think it's not much fun picking stocks these days. Not so, says J. Jeffrey Auxier.
"That's when you get the bargains," says Auxier, who oversees the Auxier Focus fund. "We're trying to buy great companies cheap, and to do that you've got to have bad news."
As long as the story depressing a stock doesn't linger, Auxier is willing to bet on a company others are avoiding. He looks for businesses he considers fundamentally sound which are facing a short-term problem that has caused investors to temporarily shun them.
In selecting the fund's stocks, Auxier scans for companies that consistently grow profits by about 9%-12% and whose stocks are priced low compared to their earnings, sales and cash flow. He prizes those with strong industry positions or a competitive edge, like the ability to raise prices or to produce goods cheaper than competitors.
Auxier doesn't limit the portfolio to stocks, however. "The fund is set up so it's pretty flexible," he says. "We let value determine the capital allocation."
