Fund in Focus: Berwyn Income Fund

About a month ago, the fund began buying SpectraLink Corp (SLNK), which makes wireless telephone systems for businesses. The stock had gotten beaten down after the company posted disappointing quarterly earnings earlier in the year, Cipolloni said. The company remained attractive, however, because it has historically generated "very significant" returns on capital, he said. In addition, Spectralink has no debt, churns out cash, and sports a dividend yield of more than 3.5%, he says.

More recently, the fund has invested in shares of MGE Energy (MGEE), a power generator. Killen sees the utility, which he says uses coal to produce about half the energy it sends out, benefitting from high oil and natural gas prices, which make coal more attractive.

The fund's top stock currently is food processor ConAgra Foods (CAG). Cipolloni says he likes the company because it has a "very diversified" product line, and its brands typically rank No. 2 in their categories. Also, by getting out of commodities businesses in the last few years, ConAgra has been able to fatten its margins "by a substantial amount," he says.

Killen, who will sell a stock if its valuation gets stretched, says he eliminated another food company, Heinz (H.J.) (HNZ), from the portfolio earlier this year, because its shares had run up.

Overall, the rate at which the fund turned over its holdings clocked in at 54% last year, compared to 50.1% for its peers. Normally, though, his turnover rate would be about 25%, Killen says. Sales of several stocks that had appreciated, like printer and publisher Donnelley(R.R.)& Sons (RRD), help push turnover up, Killen says.

On top of that, Killen says it increased because he was repositioning his bond portfolio to lower its duration (a measurement of sensitivity to interest rates) in anticipation of a tightening of monetary policy by the Federal Reserve.

Killen points out that, as a rule, the fund is not volatile because his value orientation steers him away from hot investments that can cool rapidly. Cipolloni notes, too, that the fund's mandate to hold only dividend-paying common stocks leads it to emphasize investments in conservative businesses and industries, like utilities and banks.

The fund's stability is illustrated by its beta, which measures sensitivity to changes in the market. Berwyn Income's reading is 0.13, versus its peers' 0.25. By comparison, the S&P 500 index has a beta of 1.00.

"We need to keep in mind that our clients need income, and we want to try" to provide it "with the lowest volatility possible," Cipolloni says.

Contact Bob Keane with questions or comments at: .