Newspaper article St Louis Post-Dispatch (MO)

Standing out Mutual Fund Manager Wins in Bad Year

Newspaper article St Louis Post-Dispatch (MO)

Standing out Mutual Fund Manager Wins in Bad Year

Article excerpt

Be it stocks or bonds, Robert L. Rodriguez plays both with uncommon skill.

Witness 1994, a tough year for mutual funds. His FPA Capital, a small to mid-size growth stock fund, gained more than 10 percent while stock funds in general had a small loss on average.

Even more amazing was the 1.5 percent gain in his bond fund, FPA New Income. In a year when the Federal Reserve increased interest rates six times, bond funds lost nearly 4 percent on average, prompting Morningstar Inc. analysts to say of New Income: "Bond funds don't get any better than this."

Given this spectacular performance last year, what does 1995 look like? FPA Capital should gain 10 percent to 15 percent, Rodriguez said, because the likelihood that interest rates won't "be as negative in 1995 increases the odds that common stocks will generate better returns."

In New Income, he aims to return between 7 percent and 10 percent. "With debt at 7 percent, it doesn't take much of a rally in rates to get us to a double-digit return," he said.

How does he do it?

Rodriguez, a self-styled contrarian, uses similar investing styles for both funds. He sums it up as "no gain without pain." In other words, "If you have a lot of company, it's probably too late," he said.

FPA Capital holds just 34 issues, slightly above his target of 25 to 30. Rodriguez won't pay too much for his shares; the fund's trailing price/earnings ratio is roughly 12.5, compared with 15-plus for the market.

His biggest concentration - roughly 30 percent of the $194 million fund - is in technology stocks. He sees them as a good way to participate in the growth of the economy, and he focuses particularly on data-storage companies: Seagate Technology Inc., Komag Inc. and the Storage Technology Corp.

Once he picks a stock, he hangs on. The fund's turnover averages just 15 percent, compared with 75.3 percent for stock funds, on average. "The longer the time frame, the more important the analysis of the company becomes, as opposed to what the stock market will do," he said. …

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