The father-and-son team of Frank and Barry James, co-managers of the $63 million James Advantage Golden Rainbow Fund (GLRBX), have begun to shift some of the fund's money from bonds into stocks.
"We've had a negative view of the stock market," Frank James, the father, said from their office in Alpha, Ohio, near Dayton. "Now we're getting indications that the stock market is in for a rally."
They see the biggest values in cyclical and industrial stocks, his son said. "These aren't stocks that we're going to buy and hold forever," he said, "but many of them are big bargains now and we can make big profits." About 50% of the fund's assets are now in stocks, with the balance in bonds. At the start of 2003, the mix was 40% stocks, 60% bonds.
Preserving capital is an important goal of the fund, Frank James said. The managers aim to accomplish that by finding undervalued companies that are neglected by Wall Street but that they believe have strong futures.
They use a computer model that screens mostly American stocks with market capitalizations of at least $200 million, ranking them based on ratios of price to earnings and price to book value, as well as earnings in the previous 12 months. Then they review the top 10% of companies identified by the model.
The managers say that they expect the stock market to be relatively stable in the first half of 2003 but that it may be more volatile in the second half if the economy weakens.
